Blair praises EU's 'change of gear' on economic reforms

Barcelona summit » Deal boosts Prime Minister's euro plans - and then protest turns violent

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A new EU deal on economic reform inside the talks, and late-night scenes of violence outside them, which saw windows broken, rubber bullets fired and dozens arrested, brought the Barcelona summit to a close last night.

Trouble on the streets came after a peaceful march and rally by tens of thousands of protesters when what police described as a group of 200 anti-globalisation demonstrators began smashing windows and throwing rocks and Molotov cocktails at riot police near the harbourside statue of Christopher Columbus at the foot of Barcelona's Las Ramblas promenade.

Shattered glass and crumbled bricks littered the streets surrounding the Columbus statue. In one confrontation, rioters set a rubbish bin alight and turned over a car, panicking people in nearby restaurants and theatres. In a related incident, two protesters chained themselves to the goalposts at Barcelona's Nou Camp football stadium, delaying for five minutes the start of the game between Barcelona and Real Madrid.

Municipal officials estimated that 250,000 people had taken part in the march. Organisers said the figure was nearer 500,000, many more than the 10,000 to 50,000 they had hoped for.

The talks themselves had ended four hours earlier with Tony Blair hailing the new deal on economic reform as "a change of gear" and evidence of Britain's new-found ability to "lead in Europe".

The Prime Minister emerged from a summit he once billed as "make-or-break" claiming to have forged a decisive shift within the EU towards a free-market agenda which was unthinkable only five years ago.

After a tense stand-off with France, which had sought to water down key reforms, the meeting achieved a solid but limited package of economic reforms. The measures, which included a deal to open energy markets, were just enough to salvage the credibility of an ambitious EU reform plan.

Two years ago, in Lisbon, the EU committed itself to a decade of changes designed to make it the most competitive bloc in the world by 2010, creating 20 million jobs in the process. A follow-up summit a year later produced stalemate, putting the credibility of economic reform on the line.

That was a blow for Mr Blair, who sees moves to sweep away the rigidities of European economies as a vital prelude to a battle to persuade the British public that they should join the euro.

Energy market liberalisation was the acid test because of the opposition of France to moves to break the stranglehold of its monopolies. Throughout hours of negotiations, the French Prime Minister, Lionel Jospin, and President, Jacques Chirac, talked tough, knowing that votes were at stake in next month's presidential elections, in which they are rivals. Finally, they agreed to a compromise which opens up non-domestic energy, which is 60 per cent of the market, to competition by 2004. Plans for the rest will be decided by the end of the year by a majority vote ­ under which France can be out-voted.

Asked how the decisions had helped the prospect of Britain's euro membership, Mr Blair said that the decision on the single currency would be made "in its own terms". But, he said, the summit showed "that it is possible for Britain to lead in Europe. Britain has nothing to be frightened of in Europe. On the contrary, Europe is an opportunity."

By contrast, Mr Jospin claimed credit for helping to achieve an "equilibrium between modernisation and regulation" and beefing up the importance of the social agenda in reform plans. Paris also won the go-ahead for the £2bn Galileo European satellite project ­ designed to rival the American Global Positioning System.

EU leaders agreed to boost their research and development spending to 3 per cent of gross domestic product by 2010, with two thirds of that coming from the private sector, to provide day care for at least 90 per cent of children of working mothers, and to raise the average retirement age from 58 to 65.

Other issues discussed included a revamp of decision-making, including the abolition or reform of the system under which the EU presidency rotates every six months. Mr Blair suggested that changes to summits should be on the agenda too.