Blair faces up to EU defeat

Tony Blair today faced up to charges of defeat at the hands of the EU - and fears that he has lost the chance of an early referendum on the euro.

The Prime Minister was preparing to report to MPs in the Commons this afternoon on the EU summit in Spain which ended on Saturday with a bruising result for Britain.

Foreign Secretary Jack Straw and Europe Minister Peter Hain both claimed afterwards that the Government had got "exactly what it wanted" from the summit on the critical issue of asylum and immigration. But Mr Blair himself admitted that the gathering in Seville had failed to come up with "the full answer".

A group of opponents headed by France and Sweden successfully scuppered proposals from Britain and Spain to tackle those countries outside the EU refusing to co-operate to stem the flow of illegal immigration at source.

The original plan to allow for sanctions against countries refusing to take back illegal migrants or clamp down on trafficking was replaced by a vague suggestion that the EU "may adopt measures or positions" on the issue. The unhappiness among ministers was deepened by disarray within the Cabinet. Mr Straw was reported at the weekend to be furious at public opposition from International Development Secretary Clare Short to the sanctions plan. She said that cutting aid to already poverty-stricken countries for refusing to tackle those fleeing to the wealthy West was "morally repugnant".

Mr Blair by then had already backed off the toughest measures on offer. But even his softer line was rejected by his EU partners in Seville. Mr Hain signalled retreat on another front as he conceded that the Government's sinking popularity could wreck plans for a euro referendum next year. Mr Hain, one of the leading advocates of an early decision on whether to sign up to the single currency, admitted Labour now had "a trust problem".

Speaking yesterday on the BBC's Breakfast With Frost he said: "We have undoubtedly suffered from a lack of trust from the average voter with all the kind of spin and stuff that there's been going on." And he went on: "If we called a referendum clearly we would have to deal with that."

The concern among ministers was confirmed by the latest opinion poll showing Labour's lead cut to just three percentage points.

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