PM begins fightback to reform EU finances

A battered but unrepentant Tony Blair today launched a new front in his fight against Jacques Chirac.

In a Commons statement, the Prime Minister was refusing to apologise for the collapse of the EU summit on Friday in a row with the French president over Britain's £3 billion rebate.

Instead he was launching a fightback to persuade Europe's leaders to embrace "fundamental reform" or face economic decline.

The message will be driven home with speeches by both Mr Blair and Chancellor Gordon Brown on the need to spend less on farming subsidies and more on meeting the economic challenge from China and India.

Aides to Mr Blair were digging in for a long battle to win the initiative from Mr Chirac, with some saying it would take at least two years to win round the rest of the EU.

Mr Blair thinks the "tipping point" could come if German chancellor Gerhard Schroder is defeated in autumn elections and replaced by Angela Merkel, dubbed Germany's Margaret Thatcher, who backs the Prime Minister.

Mr Chirac is expected to stand down or be defeated in 2007, leaving Mr Blair the most senior EU leader. Last week's summit ended in a shambles after Mr Chirac called Britain's stance on the rebate "pathetic and tragic".

Chancellor Gordon Brown will back Mr Blair's approach in his annual Mansion House speech on Wednesday.