Blair forced to back down on plans to punish poor nations

European Union countries were battling to reconcile deep differences last night as they prepared to water down plans to punish poor nations that failed to back the fight against illegal immigration.

Confronted by objections from France and Sweden, the Spanish presidency of the EU drew up proposals toning down threats to withdraw aid and trade concessions from countries that did not co-operate. The wrangling at a summit of heads of government in Seville was a setback for Tony Blair, who had pressed the EU to use its "economic and financial clout" to cut illegal immigration.

Diplomats worked through the night to produce a final compromise to be put to the 15 leaders today at the end of their two-day summit. Immigration and asylum have topped the agenda following the rise of right-wing anti-immigrant parties across the EU.

The original, tougher wording had been backed by Britain and Italy, which said nations with aid and trade deals with the EU must accept rejected asylum-seekers and help combat people-trafficking.

The latest draft says sanctions remain a last resort if all EU member states agree to declare a country in breach of its obligations. It stresses the fact that it would be difficult for recalcitrant nations to strengthen ties with the EU unless they changed their ways.

The wording has changed significantly since France and Sweden dug in their heels this week at a meeting of EU foreign ministers in Luxembourg. Yesterday, the Spanish Foreign Minister, Josep Pique, put his best gloss on the climbdown, arguing that if third countries failed to comply with treaty obligations, "the EU reserves the right to see whether or not there should be consequences of this behaviour".

Mr Pique said today's deal would set out a timetable for agreement on a common asylum system, including deals with third countries to re-admit their nationals, a common definition of asylum, visa-pooling arrangements and a revisedDublin convention, which sets out which EU nation should handle asylum applications.

The measures are designed to stop "asylum shopping" by people who apply to more than one EU country. "We are going to put forward a series of deadlines including common rules for asylum procedures," said Mr Pique. "There will be some concrete dates, maybe the end of this year or next year."

Plans for a new EU police force to patrol its borders, which were backed by Spain and Italy, were shelved in favour of less specific promises of inter-governmental co-operation, after objections from Britain and other nations.

Britain, which drew up the original proposals with Spain on linking aid to asylum and immigration, denied that it had been forced to dilute them. Jack Straw, the Foreign Secretary, said any reduction in aid would apply to future grants rather than existing budgets. "It will take some time. Aid is done on a yearly basis. It would be about additional aid," he said.

The summit had agreed that the EU should not penalise Third World countries but should offer them incentives, he said. Mr Straw said all 15 EU leaders had supported new measures but conceded that there was no unanimity on reducing aid payments.

Mr Straw denied the EU was in danger of pandering to the "far-right virus" afflicting Europe. "What we are doing today is inoculating ourselves against those infections.

"The way you deal with matters that parties of the extreme right are seeking to exploit is by recognising ... that there is a genuine problem of illegal immigration and then dealing with that in a proportionate, determined and humane way."