Prodi warns of possibility of two-speed Europe after Sweden's referendum result

Romano Prodi, the European Commission president, has demanded the abolition of more national vetoes and warned that a two-speed Europe will develop unless Euro-sceptic nations accept more integration.

After Sweden's rejection of the euro, he conceded that the EU faces a "major challenge" engaging with its voters. But he added: "I don't think we can conceive of always going at the speed of the slowest in the convoy. I think that the day will come when it is clear that, if European countries wish to proceed to closer union, then they will be able to do that."

In his statement Mr Prodi called for the abolition of national vetoes in areas including moves to combat tax fraud, a proposal Britain opposes. And he announced plans to streamline the European Commission in a way that one commissioner said would make it more like a government.

The Swedish vote on Sunday has cast a shadow over efforts to agree a European constitu-tion. On 4 October, the EU heads of government start detailed talks on the draft constitution for Europe drawn up by the former French president Valery Giscard d'Estaing. Several nations, including Denmark and Ireland, have decided to put the final product to a referendum and there is mounting anxiety that at least one nation will say "no", stopping the process in its tracks. That in turn raises the prospect of a hard core of countries forging ahead with closer co-operation.

But while several nations will seek to water down M. Giscard's proposed changes, Mr Prodi called for more majority voting, particularly on one area of tax. He argued that, if unanimity remained the rule in combating fraud and tax evasion, "companies and taxpayers" would have a lot to lose.

Mr Prodi also produced compromise proposals for reforming the European Commission, under which each member state would retain the right to send a voting representative to Brussels, but the current "college" system would end. Commissioners would work in groups with only strategic decisions taken by the entire Commission.

M. Giscard's original proposal, opposed by many smaller countries, would cap the number of commissioners and deprive countries of their automatic right to send a representative to Brussels.

Michel Barnier, European Commissioner for institutional reform, told Eupolitix.com website that there would no longer be a college, " but a veritable government, organised by groups of commissioners".

The Commission suggested elements of the proposed constitution should be amendable in case ofagreement by five sixths of the EU's national leaders, without ratification by national parliaments.