Tony Blair's lightning diplomatic tour of Europe's heads of state appeared to have borne fruit today as the divisive issue of cuts in EU farming subsidies was forced onto the agenda of tomorrow's budget-setting summit.

Jean-Claude Juncker, the Prime Minister of Luxembourg and current EU president, has now raised the prospect of pruning back agricultural handouts, which are worth £7 billion annually to France.

The move will infuriate Jacques Chirac and has been viewed as a victory for Mr Blair, who refuses to renegotiate Britain's cherished £3 billion rebate without reviewing the terms of the Common Agricultural Policy.

Mr Juncker's statement cranks up the pressure on both leaders to stand their ground in this new Anglo-French discontent, which was illustrated by yesterday’s frosty encounter in Paris between Mr Blair and President Chirac.

The issue of Europe dominated a tempestuous Prime Minister's Questions today as Mr Blair was accused of "wriggling like a worm on a fish hook" over the future of the stalled constitutional treaty.

Mr Blair shrugged off that accusation from Michael Howard and, in a side-swipe at French voters' 'Non' to the EU Constitution, said that the EU needed to become "more relevant to the concerns of people in the early 21st century".

He told the House: "I think there is a clear understanding now in Europe that there needs to be a far more fundamental debate about the future."

Facing the prospect of a showdown, Jose Manuel Barroso, the President of the European Commission, was reduced to appealing to EU leaders to show "political maturity and political responsibility". He said a compromise deal on the future EU budget would be better than no deal at all, adding: "Everybody is going to have to budge, to compromise."

Despite the concessions alluded to today, M Juncker said that he was not optimistic a deal would be struck on the budget during the two-day summit. According to academics, the question of resolving Europe's deeper crisis is even less likely.

Simon Bulmer, joint editor of the European Policy Research Unit series, said: "There's obviously a kind of phoney war at the moment, and the end of the week is the real one."

In the Commons, Tory leader Michael Howard said the French vote and the subsequent 'nee' from the Netherlands showed that the constitution was "dead".

Charles Kennedy, Liberal Democrat leader, also weighed into the row insisting it was clear that the constitutional treaty was "no longer viable".

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