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Senior commanders and serving soldiers gave their wholehearted backing to General Dannatt and said that it was time a service chief spoke out for the Armed Forces.
The Government moved from outright fury at the general’s intervention to restraint as ministers realised that, because his remarks were popular with the Army, they could not afford to sack him.
Ministers said privately that General Dannatt was out of order, but that to have asked for his dismissal would have made an already tense situation worse.
General Dannatt later stood on the steps of the MoD for the benefit of television cameras to underline his support for Britain’s policy on Iraq, which allowed Mr Blair to claim that the Chief of the General Staff had just been stating government policy.
Mr Blair said he agreed with every word the general had said in his radio interview on BBC Today.
But he pointedly refused to say the same about the newspaper interview.
General Dannatt was “plainly not” saying that troops should be withdrawn from Iraq now, Mr Blair said.
He added: “I’ve read his transcript of his interview on the radio this morning and I agree with every word of it.
“If you read the transcript of the interview on the radio this morning and the television, he sets in proper context exactly what he was saying.”
However, Michael Portillo, the former Conservative Defence Secretary, said General Dannatt’s remarks had undermined the authority of Tony Blair and that his relationship with ministers was now “absolutely compromised”.
Sir Malcolm Rifkind, also a former Conservative Defence Secretary, said the general should be sacked if he strayed into the political arena again.
Senior defence sources told The Times that “categorically there was never any question of General Dannatt being asked to resign” once the remarks he had made about Iraq in an interview with the Daily Mail had been studied by the Prime Minister and by Des Browne, the Defence Secretary.
Officials and ministers were initially outraged when reports of General Dannatt’s words reached them on Thursday night.
Downing Street and the Ministry of Defence were involved in late-night discussions about how to limit the damage.
But the impact of his words, which military sources said had taken him by surprise, prompted General Dannatt to issue a statement in which he aligned himself unshakeably to Government policy on Iraq.
He said that he did not want to see the Army “broken” by an extended campaign in Iraq but that he agreed that troops should stay there for as long as the Iraqi Government needed them.
The tone of his statement and his numerous clarifying interviews on radio and television followed a late-night telephone call from Mr Browne.
General Dannatt had said that the continuing presence of British troops in Iraq was exacerbating security issues.
In his conversation with Mr Browne, according to defence sources, General Dannatt offered to appear on radio and television to put his interview remarks into context.
His suggestion, which was swiftly taken up by Mr Browne, took the sting out of the story and the damage-limitation exercise began to roll.
Had he not made the offer, he would have been forced to do so, The Times has been told.
General Dannatt, 55, a holder of the Military Cross who became Chief of the General Staff in August, denied that he was a maverick and said that he saw “eye to eye” with the Prime Minister.
Mr Blair’s official spokesman said that General Dannatt retained the “full support” of the Prime Minister.
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