JACQUES CHIRAC suffered a double blow as the EU summit opened last night when he was forced to admit defeat over the European constitution, and Tony Blair won powerful allies for his campaign to cut French agricultural subsidies.

Mr Blair feared isolation in his battle over Britain’s £3 billion rebate unless there was a thorough overhaul of EU farm spending as well.

But Dutch and Swedish leaders backed the Prime Minister’s call for the £600 billion budget to be reduced, and Mr Blair received a surprise incentive to stall in negotiations when the conservative politician expected to be Germany’s next leader told France to cut back its agricultural subsidies.

Angela Merkel, favourite to replace Gerhard Schröder in September, said that it was unreasonable to expect Britain to surrender its rebate if France would not cut farm subsidies.

As one of the most momentous summits in years opened in Brussels, EU leaders agreed to put the constitutional treaty rejected by France and the Netherlands into deep freeze.

President Chirac and Herr Schröder had to drop their insistence that the ratification process continue and at 11.20pm the Luxembourg presidency formally declared that the timetable for ratification by November next year was dead. It would be reviewed next year but member states would be allowed to decide whether to go ahead ahead with planned votes. In diplomatic language, summit leaders were laying the treaty to rest.

The Danes were first formally to call off their referendum planned for September. “A new date has not been set,” Anders Fogh Rasmussen, the Prime Minister, said.

But M Chirac opened a fresh front by raising questions over Turkey membership, which Britain has said will be a priority for its presidency. He called for an extraordinary meeting of European leaders to debate the EU’s future, arguing that without reforms in the constitution, Europe could not cope with further enlargement.

Several countries were reported to have supported France’s view on enlargement. But Bulgaria and Romania remain on track to become members.

The day began with Herr Schröder telling the German parliament that there was “absolutely no justification any longer for the British rebate”, but he was instantly contradicted by Frau Merkel, the Christian Democrat leader.

“It does not make sense when one side says that the agricultural subsidies are sacrosanct, then flexibility is demanded from others,” she declared.

Frau Merkel’s remarks pointed to a potentially big shift in German foreign policy should she be elected.

Her intervention means that Mr Blair has no incentive to reach a deal when the summit attempts to agree a seven-year budget today. Britain assumes the presidency next month and, within weeks, Mr Blair should have German support for the overhaul of EU finances that he has demanded for surrendering the rebate. Herr Schröder has defended France’s right to keep the agricultural benefits agreed in 2002.

Göran Persson, the Swedish Prime Minister, and Jan Peter Balkenende, the Dutch Prime Minister, also supported the British call for a thorough spending review. Both said that they could not sign up to the present budget because their net contributions were too big.

Mr Blair, pleased with his efforts to turn the row about the British rebate into a wider debate about EU finances, was able to claim that he was no longer fighting a lone battle.

Mr Blair is desperate to avoid being held responsible for a deadlock, and last night British officials declared that it was not Britain against the rest.

Mr Blair was under pressure from Cabinet colleagues, including Gordon Brown, the Chancellor, not to compromise on the rebate. Mr Brown and Jack Straw, the Foreign Secretary, were worried that Mr Blair was ready to grant too early a potential compromise, disclosed by The Times on Wednesday, to exempt the newer and poorer EU member states from contributing to the rebate.

Mr Blair told them that he was trying to avoid being isolated. Officials said that the concession could only be part of an overall deal, including agricultural spending.

At a pre-summit meeting, Mr Brown and Mr Straw urged Mr Blair only to offer his £300 million a year concession as part of an overall deal.

They were angry that Peter Mandelson, the trade commissioner, had referred to the plan on Monday even though Britain had privately had it in reserve for some time.

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