In a speech painting an optimistic future for Europe and Britain’s part in it, Mr Blair admitted for the first time that Europe had got the introduction of the single currency and the constitution wrong.

Adopting a markedly Brownite view of the EU, Mr Blair said that too often Europe had put political decisions in front of economic ones. The answer had too often been “more Europe”, he said. He suggested that British prime ministers were treated either as traitors or isolationists over Europe.

But he admitted far too much time had been spent on institutional reform, and too little on radical policy changes.

He was accused of a U-turn last night after criticising the way in which the constitution had been drawn up. There had been two or three years of intense institutional debate yet no one in Europe knew what it was meant to solve, he said.

“As the problems of the citizen grew ever more pressing, instead of bold policy reform and decisive change we locked ourselves in a room at the top of the tower and debated things no ordinary citizen could understand.”

Critics pointed out that the Labour manifesto had described the constitutional treaty as good for Britain and for the new Europe and had promised that Labour would campaign wholeheartedly for a “yes” vote.

Similarly, Mr Blair, once an avowed campaigner for the single currency, accepted his Chancellor’s stance that the economics must be right before Britain could enter. He said a single currency should come with the completion of a single market. “In truth, however, the political decision to create a single currency was taken first; the economics were treated as if they could be altered by political will. The reality is they can’t.”

However, Mr Blair said that the single currency would ultimately be to Europe’s benefit and Britain had the option of joining. “The economics had to be got right and the politics follow. In time this will sort itself out. But it will take time.”

He added that ultimately they would have to return to the issues surrounding the constitution, rejected by referendums in France and the Netherlands. A union of 25 could not function properly with today’s rules of governance, he said. In a further nod towards Mr Brown, Mr Blair said that there was a strain of Euroscepticism called “practical scepticism” which was “a genuine, intellectual and political concern about Europe as practised”.

He said: “This is not xenophobia, nor devotion to undiluted national sovereignty, but a worry about Europe’s economy being uncompetitive; its institutions too remote; its decision-making too influenced by the lowest common denominator.”

Mr Blair’s speech at St Antony’s College, Oxford, was valedictory in tone. He spoke of the empathy he felt for Harold Macmillan, the former Tory Prime Minister, who had tried to woo France to get into the Common Market. But even then, when the EU was young, the political and cultural differences in approach between Britain and Europe was “working its mischief”.

“The dilemma of a British prime minister over Europe is acute to the point of the ridiculous. Basically you have a choice: co-operate in Europe and you betray Britain: be unreasonable in Europe, be praised back home and be utterly without influence in Europe. It’s sort of: isolation or treason.”

Then, in words that appeared to emphasise that he regarded his time in charge as limited, he added: “To be frank, nowadays, I take a perverse pleasure in it all. But it isn’t sensible.”

Mr Blair, in his first big speech on Europe since the end of the British presidency, said that the EU could emerge from recent crises stronger, but only if a new generation of leaders listened to its people. Britain had a “shining opportunity” to put its historic antagonism firmly behind it and feel “comfortable” to play a major role.

“Europe has emerged from its darkened room. Despite all the setbacks of recent years, I have no doubt that, in times to come, Europe will be stronger and more integrated. For Britain, this is the last time imaginable to walk away.”

William Hague, the Shadow Foreign Secretary, said: “As his departure nears, I expect we will see more of these valedictory elegies from the Prime Minister. However, the point he fails to tackle is why prospects for the EU are so bright when he has failed in his two great European projects: the euro and the constitution.”

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