Tony Blair won rare plaudits from Michael Howard today as the leader of the Opposition congratulated him for his defence of Britain's European Union budget rebate at an EU summit last month.

Mr Howard's words of praise came after the Prime Minister, in a statement to the Commons, attacked the EU's culture of "cobbled-together compromise" and tore into the institution whose presidency he takes over in ten days time.

Mr Blair found himself virtually isolated among the EU's 25 leaders on Friday as he refused to renegotiate the £3 billion annual rebate without France and Germany agreeing to reopen the Common Agricultural Policy.

He said today that the budget put forward was not one that he could not have recommended to Parliament: "It was not the right deal for Britain. It was not the right deal for Europe."

Mr Blair said that proposed measures to review spending "fell way short" and that there was the need for a root-and-branch budget review.

He mounted a strident defence of his budget-blocking tactics and said: "It is said the failure to reach a deal has deepened Europe’s crisis, that Europe’s credibility demanded a deal. No. Europe’s credibility demands the right deal - not the usual cobbled-together compromise in the early hours of the morning but a deal which recognises the nature of the crisis."

Mr Blair repeated that he would not begin to discuss cutting Britain's rebate without overhauling the CAP, saying that under the proposed budget Britain would have ended up contributing more than twice what is paid by France and slightly more than Germany.

He said: "It simply does not make sense, in this new world, for Europe to spend over 40 per cent of its budget on the CAP.

"We are spending seven times as much on agriculture as research and development, science, technology, education and support for innovation combined. This isn’t a budget fit for purpose in the 21st century. Europe just cannot wait ten years or more for change.

"Our position was not to refuse any change to the rebate, to rule out a discussion or to disown responsibility to pay for the enlargement of Europe we support passionately. On the contrary, I made clear we should deal with both anomalies - the rebate and the CAP."

Mr Howard, the Conservative leader, welcomed his statement. He said: "I sense - I hope I’m not mistaken - a real change in the way that you and some of your ministers are approaching reform of the EU. If that conversion is genuine, no one will be more delighted than I am.

"Let me congratulate you for protecting the rebate. You were right to insist that Britain’s rebate should remain in tact. We fully support you in that."

But Mr Howard nevertheless complained that the the Prime Minister had "wasted" two years trying to sell an "outdated vision of the EU" through the proposed constitution and said that given the ‘no’ votes by France and the Netherlands, ratification of the constitution cannot succeed.

Mr Blair appeared to agree: "Whatever words are used in the Council conclusions, standing the results of the French and Dutch referendums, the Treaty cannot proceed.

"It is therefore sensible, instead, to have a period of reflection, in which critical questions as to Europe’s future direction are debated."

He said that the rise of China, India and other Asian countries was creating a "wholly new" economic environment.

He pledged to use the UK's six-month EU presidency, which begsin in July 1, to work for agreement on a new seven-year EU budget and to continue to champion the cause of EU enlargement. The Prime Minister is personally committed to Turkish entry into the bloc.

He added: "The crisis is not about the failure of Europe’s leaders to reach agreement with each other. The crisis is about the failure of Europe’s leaders to reach agreement with the people of Europe about the issues that concern them."

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