Blair accuses EU of holding back free trade

Tony Blair hardened his rhetoric on Europe last night, warning EU leaders to press ahead with economic reforms to increase free trade.

Speaking in the Brazilian city of Sao Paolo, Mr Blair said next year's Barcelona economic summit represented a "make or break" watershed for economic reform.

The Prime Minister insisted economic liberalisation was the only way the European Union could achieve its aims of full employment and social justice.

He indicated that he wanted to see reforms agreed at the Lisbon and Stockholm summits implemented.

The aim would be to cut red tape, increase labour market mobility, free up the financial services sector and open up competition in energy and technology.

Speaking on the second day of his tour of the Caribbean and Latin America, Mr Blair said: "The best way to reach full employment is not state intervention.

"It is by focusing on training, education, human capital, reforming welfare systems so they provide a hand up not a handout, pursuing policies that makes it easier for entrepreneurs to start businesses, not harder.

"Barcelona next year is make or break for economic reform in Europe, a real test of our collective European leadership.

"We already have a strong package of structural reforms to modernise Europe, increase employment and promote growth. But we need to deliver it."

Mr Blair's official spokesman said that the reform programme would have to include the long fought for overhaul of the common agricultural policy.

The spokesman said Mr Blair was deliberately making the speech in Latin America to underline the need for Europe to reform its own affairs if it wanted other parts of the world to accept greater economic liberalism in the forthcoming round of world trade talks.

The spokesman said: "You cannot argue for reform in Latin America unless you are prepared to face up to the need to modernise and liberalise outdated industries in Europe.

"The Prime Minister feels the need for European leaders to face up to these issues. Progress has been made but we need to make more."

Mr Blair's spokesman insisted that his speech was not intended to send the message that Britain would only sign up to the euro once reform was under way.

"This speech is about liberalisation. It is not about the single currency."