GORDON BROWN called on the European Union last night to end its integrationist ambitions and make the radical economic reforms needed to turn it from a trade bloc into a force able to compete in the world.

The Chancellor urged a “pro-European realism” whereby the Union rose to international challenges while accepting that identities remained rooted in the nation-state.

Mr Brown outlined in his annual Mansion House speech how he and the Prime Minister would make economic reform the centrepiece of Britain’s six-month presidency of the EU.

Mr Brown went on the offensive over the European budget and called for sheltered markets to be opened up, “starting with agriculture”.

Tony Blair will repeat that message when he addresses the European Parliament today, seeking to dispel the “caricature” advanced at the recent EU summit of Britain being a Dickensian economy.

Britain’s campaign for cuts in farm subsidies in return for cuts in the rebate was backed by José Manuel Barroso, President of the European Commission. Senhor Barroso supported plans by Mr Blair to reach a budget deal for 2007 to 2013 by agreeing to review the entire budget, including the Common Agricultural Policy, in 2008.

Mr Brown said that the postwar authors of integration had assumed that cultural and political integration would follow economic integration; in their wish to secure a Europe at peace they came to believe that a European identity could supersede national identities.

Referring to the recent “no” votes in France and the Netherlands, Mr Brown said that voters were making plain that globalisation had made them feel economically insecure.

Identities remained rooted in the nation-state. “The economic reality is no longer as it was in the 1980s — how this or that trade bloc develops on its own — but how each continent is part of and benefits from globalisation on its own,” he said.

He added: “ The political reality remains people’s attachment, for example on issues of what is taxed and by whom, to their national values. We need a pro-European realism that starts from the founding case for the European Union, the benefits of co-operation among nation-states for peace and prosperity, but strengthened by the insistence that Europe looks outwards as a global Europe and is driven forward by the need for reform.”

Mr Brown set out a plan for reform, starting with a political commitment to completing the Single Market and reducing and then eliminating aid to member-states. The budget should be spent on science and training instead of, as at present, 55 per cent of it being devoted to agriculture or subsidies for the richer countries.There should be a “modern social dimension” to meet the objectives of a full-employment Europe. He would continue to resist attempts to make the Working Time Directive apply to Britain. There should be labour market flexiblity to help the unemployed find jobs.

There should be a commitment to regulatory reform and an outward-looking relationship between Europe and the rest of the world, with an economic forum between European and American ministers to break down trade barriers. “Our task . . . is to move Europe from the old trade-bloc Europe to the new global Europe,” Mr Brown said. “We do so under the banner of pro-European realism where Europe looks outward to the world, where Europe sees the US as partners not rivals, where Europe becomes more competitive, more enterprising.”

Times Recommends

• The Japanese Prime Minister is doomed: or is he?
• Brighton company 'involved in cyber attack'
• The art of survival: it's all in the mind