The two-day conclave spectacularly broke down in the early hours of Saturday when, having rolled back the deadline to ratify the moribund EU constitution the day before, EU leaders failed to agree the bloc's budget for

A chief stumbling block was Blair's refusal to give up Britain's sancrosanct EU rebate without an iron-clad guarantee of a thorough re-think of the way the European Union spends its taxpayers' money.

In Blair's eyes, however, there was a bigger, more profound object at stake - "reconnecting" Europe with the people who live in it.

"This is a moment of renewal... I think that if we start to respond to people, even actually if we began a debate that they thought was relevant, it would do us some good," he told reporters.

"We've got the opportunity over the next few months to do that, and maybe some of these problems on the budget will be easier to resolve once you've had that fundamental debate about the future of Europe and its direction."

Blair's overriding concern is that, with double-digit joblessness in France and Germany, the core of the European Union lacks what it takes to compete with up-and-coming China and India, let alone the United States and Japan.

He argues that economic reforms, embraced five years ago with the goal to make the European Union the world's most competitive economy by 2010, have fallen behind while rigid social policies fail to make the most of Europe's workforce.

Blair's priorities for the British presidency dovetail neatly with his agenda for the July 6-8 summit of the Group of Eight powers - Britain, Canada, France, Germany, Italy, Japan, Russia and the United States - that he will host at Gleneagles, Scotland.

Global warming is one of his G8 priorities. The other is wiping out chronic poverty in Africa - poverty blamed in part on farm subsidies which effectively stop African farmers from selling their produce to rich countries.

Sweeping reforms might not sit well with French President Jacques Chirac and German Chancellor Gerhard Schroeder, who fought hard in Brussels to strip Britain of its rebate while keeping the Common Agricultural Policy intact.

But in the end, analysts believe that time and circumstances are on Blair's side as a new generation of EU leaders - many of them from the enlargement states in the formerly communist eastern Europe - comes to the fore.

"I think he wins a grudging respect from his opponents," said Alasdair Murray of the Centre for European Reform, a think-tank in London that specialises on EU issues.

"He's in a much more powerful position than before, because he's at least won an election and he's still the master of his own destiny," Murray said by telephone.

"The others are clearly going - Schroeder quite soon and Chirac in the not too distant future."

Blair's clarion call for debate in Europe echoes the "Big Conversation" that his Labour Party initiated in the months leading up to its re-election last month, quizzing ordinary Britons on what they really wanted.

"In how many countries around the (summit) table today would a referendum (on the constitution) be won?" Blair asked when he met reporters in the wee hours of Saturday, minutes after the summit's collapse.

"I've always believed in Europe because I think that the broad sweep of history is on the side of countries coming together and cooperating in the modern world," he said.

"It makes perfect sense. The European Union as an idea makes sense in today's world - but it has constantly to have the ability and energy to renew itself."

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