Blair: Europe must reform to cope with globalisation

On the eve of a one-day summit in Hampton Court, Mr Blair braved heckles from MEPs in Strasbourg and raised the stakes in the ideological battle over the future of the EU.

Mr Blair surprised critics by calling for a pooling of EU energy supplies, as well as more European co-operation on higher education, science and migration policy.

Criticised for failing to deliver on the vision of renewal he outlined in the summer, the Prime Minister responded with a fluent performance setting the tone for the two, crucial, final months of the EU presidency.

The pro-European tone of the speech was accompanied by a softening of language over British demands for a reform of the Common Agricultural Policy. Both elements could help break the deadlock over the EU's budget - the main problem hanging over the presidency.

However, the depth of divisions in the EU became clear when the Prime Minister's calls for deregulation and liberalisation of Europe's lucrative market in services was heckled.

Mr Blair said the EU's 25 member states had to be "prepared to pool our energy and our resources" under a common energy policy, and an EU-wide electricity grid. Such a move was necessary because Europe was "going to be importing within the next few years something like 90 per cent of our oil and gas".

Britain has traditionally been suspicious of any such initiatives, fearing they would threaten control of North Sea oil.

Mr Blair also proposed putting more EU cash into research and development, and called for a European research centre, similar to the American National Science Foundation. "Our university sector isn't competing in the way it needs to with the United States," he argued.

At today's meeting, the 25 leaders are likely to endorse a strategy document prepared by the European Commission that identifies growing competition from China and India as a major challenge for the EU.

That document has already been attacked by Eurosceptics because it calls for a more "co-ordinated approach at the EU level" on taxation.

The outgoing German Chancellor, Gerhard Schröder will attend, complicating matters for Mr Blair who had hoped to welcome his more reform-minded successor, Angela Merkel.

However, Britain has high hopes to avoid another summit clash with the French president, Jacques Chirac, who criticised Mr Blair after the breakdown of a meeting in June to set a new EU budget for 2007-13.

At that meeting, Mr Blair refused to compromise on the UK's €5bn (£3bn) annual budget rebate unless there was a pledge to reform the EU's CAP.

Yesterday, Mr Blair, who wants to avoid any real discussion on the budget today, softened his position: "We're not saying we can change the whole system overnight. What we are saying is we should in the future have a different perspective."

But one senior French source said:"Blair is supposed to be on a charm offensive, not stabbing us in the back."

The issues

Globalisation fund

What Blair wants

A fund of half a billion euros to help retrain and re-skill those out of work as a result of globalisation.

Who disagrees

Germany on the grounds that it is not clear where the cash will come from. Others will need convincing that it isn't about backing lame ducks.

Likely outcome

A deal in principle, but no financial commitments. These will have to be negotiated in December.

Research and development

What Blair wants

More cash should go to R&D. New European Research Council to forge links between businesses and universities.

Who disagrees

No one, in principle, but France opposes any idea of switching funding from agricultural subsidies to R&D.

Likely outcome

General agreement on strategy. But tough talks ahead on how to fund it.

Energy

What Blair wants

A common energy policy including pooling of resources - something the UK opposed in the drafting of the EU constitution.

Who disagrees

Generally backed by other countries though support will depend on details which are as yet unclear.

Likely outcome

Broad agreement in principle rather than substance.

Migration

What Blair wants

A strategy on controlling immigration, but also on how economic migrants can be used to fill gaps in the labour market.

Who disagrees

Most nations will want to keep control of immigration policy, but most would also sign up to a more general strategy.

Likely outcome

More emphasis on the existing EU co-operation on justice and home affairs.

Market reform

What Blair wants

More deregulation and a deal to open Europe's lucrative market in services to competition.

Who disagrees

Massive opposition in France and a clutch of other countries. Bitter debate on the issue before the French vote on the EU constitution.

Likely outcome

Either deadlock or a watered-down reform.