New Euro row as Blair blocks German choice

Tony Blair was locked in a new dispute with Germany today after he torpedoed its candidate to take over the European Commission.

Germany's reaction was cold and swift. A senior official dismissed his objections and said German chancellor Gerhard Schr?der would use a dinner of the 25 leaders tonight to rally supporters.

"We will actively stand up for Mr Verhofstadt," said the official. He added that Mr Schr?der was flatly against suggestions the decision might be put off for a month to allow a search for new candidates, saying: "It is absolutely essential to take this decision now."

The clash came only hours after Mr Blair appeared to be winning key concessions on the EU constitution over tax and legal changes which could strengthen unions. Hopes of a summit deal on Britain's terms rose - only to falter when the new row put Mr Blair at odds with both Mr Schr?der and French president Jacques Chirac, another cheerleader for Mr Verhofstadt.

The 51-year-old Belgian prime minister had been favourite to emerge as leader of the Brussels-based Commission, with powers to affect the lives of millions.

But Mr Blair, backed by Poland and Italy, was appalled at the prospect of an arch-federalist who backs tax harmonisation and led opposition to the US-British invasion of Iraq. "The UK does not support Mr Verhofstadt for the presidency of the Commission," a British official stated, without giving reasons.

Mr Blair's pre-emptive strike came almost exactly 10 years after John Major vetoed the appointment of another Belgian, Jean-Luc Dehaene, for the job. There was immediate speculation that the Germans would oppose Mr Blair's preferred choice, thought to be Portugal's Antonio Vitorino, in return.

In another sign of a backlash, a call by Mr Blair for a debate on the nature of the EC president's role before a decision is taken was dismissed. Irish EU envoy Anne Anderson said prime minister Bertie Ahern, who is chairing the talks, thought Mr Blair should suggest a specific alternative to Mr Verhofstadt.

The confusion grew when the second favourite, Luxembourg premier Jean-Claude Juncker, ruled himself out and backed Mr Verhofstadt.

On other fronts, the summit talks appeared to be going Mr Blair's way. A new draft of the treaty left out scrapping the veto on tax fraud laws, which Britain feared could lead to tax harmonisation in future.

In a markedly Eurosceptic intervention, Chancellor Gordon Brown used his Mansion House speech to the City last night to attack "fatally flawed" tax harmonisation ideas.

EU officials were also working on new wording to stop the Charter of Fundamental Rights from being used by judges to give trade unions new rights to strike .

But it was not immediately clear whether France and Germany, which opposed any more concessions to the UK days ago, would back the changes.

No 10 has been openly admitting the summit could break down over several issues, including a row over voting rights involving Spain, Poland, France and Germany. The constitution is meant to replace previous EU treaties and bring in more majority voting to cope with the EU's expansion to 25 members.