JACK STRAW gave business leaders a guarantee last night that he would not accept a European constitution that watered down Britain’s industrial relations laws, including those on secret ballots and secondary picketing.

The Foreign Secretary’s pledge to prevent the controversial charter on fundamental rights creating new rights under national law was designed to counter growing opposition to the constitution from the business sector, without whose support ministers fear they could lose the referendum promised by Tony Blair last month.

But Mr Straw’s hard line threatens further difficulties in negotiations on the constitution, which broke up in Brussels yesterday with little progress after the Foreign Secretary was accused by France and Germany of “salami tactics” designed to extract further concessions from his partners. France said yesterday that there was no point in further negotiation, demanding instead a “moment of truth”, forcing Britain into either abandoning its hopes over its so-called “red lines” or rejecting the constitution.

Germany and France also gave warning that they wanted to be able to work more closely together in co-ordinating policies such as tax and social security, leaving Britain behind in what would be seen as the creation of a “two-speed Europe”.

Mr Straw has said that he will agree to giving the charter legal force only if it is made clear in the treaty that there will be no new national rights that would allow organisations such as unions to challenge British law in the European Court of Justice. In a speech to the CBI in London last night, Mr Straw said that he would not allow the charter to “upset the balance of Britain’s industrial relations policy”. He said that the Government had “put the interests of business at the heart of our negotiating position” on the treaty.

His words were welcomed by the CBI but are likely to infuriate union leaders, who held a summit yesterday to demand more influence in a third Labour term.

Sir John Egan, the CBI president, said that the constitution should not lead to a hidden increase in rights. Ministers must remove any risk of the treaty overturning British law on union recognition, secret strike ballots and secondary picketing, he said. He said: “The Government must deliver on the red lines it has vowed to defend in its negotiations at the intergovernmental conference, most importantly on tax and social policy. The treaty must not put at risk our laws on trade union recognition, secret ballots before strikes and secondary picketing, which have been so important in creating the UK’s flexible labour market.”

British officials voiced optimism last night that Mr Straw would win his demand over the charter despite the opposition of France and Germany. The two-day meeting in Brussels broke up with such little progress that another emergency meeting was immediately called for next week to try to resolve the deadlock. The Irish Government, which is chairing the talks, has just one month to resolve a large number of disputes before a summit on June 18, where European leaders have committed themselves to agreeing the constitution.

Mr Straw repeated Britain’s red-line issues yesterday, insisting that it must retain the national veto on tax, social security, foreign policy, the EU budget rebate and criminal law.

Amid mounting gloom, Michel Barnier, the French Foreign Minister, said: “We have gone as far as we can go in discussion. Now we need a moment of truth.”

Joschka Fischer, the German Foreign Minister, said that each country – most notably Britain – should lose its veto on blocking other countries wanting to harmonise policies such as tax.

The consitution was meant to have been agreed at a summit last December, but it collapsed when differences between member states proved irreconcilable.

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