Mr Blair still does not understand why he has lost the voters' trust

There was every indication yesterday of a leadership regrouping, and none of a diminishing appetite for continuing office
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Supposing by some crazy error, the charts displayed at No 10 yesterday had been switched with those for some secret internal pre-press conference presentation by Philip Gould, New Labour's polling guru. And that they contained various exhortations on how to recover short term from the crisis which reached its climax with the death of David Kelly. These might have read: Admit there is a trust problem but don't elaborate too much. Focus the public - and government - on public service delivery because "in the end" that's what will determine the election. Deflect as many Iraq-related questions as possible by urging press to "wait for Hutton inquiry". And - perhaps - don't personally attack the BBC because there are plenty of others who will do it for you.

For that pretty well summarises what was really unveiled in Downing Street yesterday - a political strategy from now until the Labour Party conference. And when such a thing emerges from what arguably remains the most efficient electoral machine in the Western world, it deserves to be taken seriously. There was every indication yesterday of a leadership regrouping, and virtually none of a diminishing "appetite" - Blair's own word - for continuing office.

What's less clear is the extent to which the highly sensitive antennae of Tony Blair have picked up how far his political capital has been depleted by unstinting support for the US in Iraq - at home and abroad. This is a different question from the rights and wrongs of war. Sometimes it is no more than a matter of tone. There was a brief moment, when Blair was asked yesterday whether the British were better at running an occupation than their US counterparts. You couldn't help feeling that in his instinctive desire to defend US operations in Iraq, he passed up an opportunity to praise British forces in south-eastern Iraq more lavishly than he did.

Much more striking, however, was his answer to the rather important question of how far his ambition to play a leading role in Europe had been undermined by his stance on Iraq. Acknowledging that this might seem "counterintuitive", he went on to suggest that relations with the EU have significantly strengthened since the fall of Baghdad.

Mr Blair may have a point, in that relations with France, as well as Germany, have improved since the nadir in the run-up to the war in Iraq. But they could hardly do otherwise, so bad were they then. There are significant ways in which they could be improved much further. But Mr Blair is being hyper-optimistic if he thinks this can be achieved without some very hard work in London and Washington, as well as in Paris and Berlin.

In a lucid and revealing exposition just out, Transatlantic Rift: How to Bring the Two Sides Together, Charles Grant, the Director of the Centre for European Reform, is commendably even handed in apportioning the blame for the crisis in transatlantic and Anglo-French relations in the run-up to the war - blame from which Jacques Chirac in particular, as well as Tony Blair, cannot escape. But it's impossible to read Grant's account of the breakdown without accepting that the British government lost real ground in the EU because of the split.

He quotes a "former Nordic Prime Minister" as remarking that "we used to look upon Blair as the pre-eminent European leader, but since Iraq we see him as a very interesting British leader". Even more tellingly, given the tendency in London to underline the frictions between "old" and Atlanticist "new" Europe, he quotes a Polish minister as confessing: "We like the British, but we have to ask whether it makes sense for us to develop a close friendship, given that they have become much weaker in Europe."

Because Grant is a constructive as well as a friendly critic, he suggests a number of achievable ways in which all the parties to the EU-UK-US relationship can start to mend it. The British, he argues, need to take some "moderate risks" with the US relationship by being less unconditionally uncritical of Washington; do much more to highlight the fact that - Iraq apart - Britain is very close to the other leading European powers on big issues of foreign policy, from Israel-Palestine to the International Criminal Court, from Kyoto to the Balkans; to back off attempts to exacerbate the split between old and new Europe in its short-term domestic political interests, as it did by signing the famous pro-US "letter of eight" before the war; and demonstrate their commitment to European Defence and Security Policy, on which, despite the clearance of many obstacles in its way, he has not even made a speech since he was turned over by the eurosceptic press on the subject after the Nice summit. In the subtext of its analysis is also the requirement for London to use what influence it can to move the US towards the kind of UN resolution which would allow greater international participation in peacekeeping and political development in Iraq.

Blair can reasonably point out that parts of his speech to Congress did make a modest start on some of this. What's more, the important paper on global security written by Javier Solana and approved by the EU - like the EU's tougher line on Iran - is a big advance towards US thinking. Indeed, Blair would show that he realises the depth of the damage caused in relations with the EU if he gave rather more public credit for this development than he so far has.

As abroad, though, so at home. Blair's people appear to believe that events in Iraq will move their way in the coming months. No one would expect him to resile even if they didn't. Any more than anyone expects that the evidence he now clearly believes the Iraqi Survey Group has found will clinch the argument that Saddam posed a clear and present threat to Western interests. Blair is said to have resolved that he can, and will, recover from the travails of the past few weeks. A suggestive symbol of his determination is that, after the unforced and embarrassing error of the Cherie Blair photo display in Marie Claire, he may have finally hardened his heart against the continued influence of Carole Caplin.

But this is a mere detail. To take a weightier example it is not, it isn't good enough, as he did yesterday when pressed several times on relations with the BBC, to imply that this too can wait until Hutton has reported. All he wanted, he said, was to correct one wrong story.

But that hardly does justice to the much wider attacks on the BBC - whether Alastair Campbell complaining about it giving too much coverage to anti-war dissent, or Peter Mandelson putting the boot into Gavyn Davies, the BBC chairman, or Tessa Jowell making veiled threats about the renewal of the Charter. Calling a halt to this, which Blair didn't yesterday, is important because it's a battle for public opinion it can't win. It would also be a recognition that his chosen method of persuading the British public to back a war in Iraq has come at a heavy price.