Even as Tony Blair received America’s highest civilian award from President Bush, he was looking beyond his old ally to his prospects of a significant role in the world, perhaps as president of Europe.

The former Prime Minister, whose tenure was blighted by disputes over his support for the war in Iraq had the Presidential Medal of Freedom hung around his neck by Mr Bush.

Unlike his comrades-in-arm from the war on terror who also received the honour yesterday — Álvaro Uribe of Colombia and John Howard of Australia — Mr Blair looked faintly embarrassed as the President joked about their shared taste in toothpaste and said: “The truth is I did feel a close connection.”

For Mr Bush, it was a final act of friendship in the White House before the curtain falls on his deeply unpopular administration next week. Mr Blair, however, has no intention of departing the global stage just yet as the Middle East peace envoy or perhaps even as EU president.

Mr Blair suggested that there may be more continuity between the old Bush-Blair era and the new US administration than some of Mr Obama’s supporters, at home and abroad, would like to imagine.

“The election of Barack Obama has created a great sense of possibility and hope but a lot of the issues from the past eight years are still there,” he told The Times. “They are difficult and they will require some really tough decisions. That is the way with politics — as we can see from the crisis in Gaza — the expectations change, the problems remain.”

Senior British sources say that although the new president is expected to make a decisive break with the past by withdrawing troops from Iraq and closing the Guantánamo prison camp, he is likely to reinforce Mr Bush’s staunch support for Israel while facing similar challenges from countries such as Russia or China challenging American hegemony.

The former prime minister is understood to reject emphatically any suggestion that his role in the Middle East will be rendered irrelevant if, as expected, Mr Obama sends a full-time US envoy to the region.

Instead, Mr Blair has repeatedly pressed Mr Bush and Mr Obama for precisely such an appointment to complement his own efforts on Palestinian reconciliation and economic development. He points out the progress achieved on West Bank security by General James Jones, who was briefly an envoy for Secretary of State Condoleezza Rice. With Europe now the biggest single contributor of Palestinian humanitarian aid, Mr Blair also believes the US must recognise the “international dimension” of the peace process.

Mr Blair already has a close relationship with Hillary Clinton, who has been nominated for the key post of Secretary of State, and yesterday he was holding talks in Washington with General Jones who is set to be Mr Obama’s National Security Adviser.

Yesterday, Mrs Clinton went out of her way to praise Mr Blair's work in the Middle East and said his function will “need to be continued in whatever structure we ultimately decide upon”.

Mr Blair is also back in the running as a potential president of Europe where the economic and military upheavals of recent months have underlined the need for a politician of his stature to lead the union.

The post of President of the EU’s Council of Ministers was enshrined in the Lisbon Treaty, which Irish voters rejected last June. If the Irish change their minds in a fresh vote next autumn and the Czech Republic also endorses the treaty, the role could be created next year.

Officials in Paris say that Nicolas Sarkozy, the French President, who has just ended an energetic turn in the rotating EU presidency, believes that Mr Blair fits the bill for a heavyweight figurehead for Europe.

Jean-Pierre Jouyet, the former French Europe minister, said: “Europe will need a real political leader capable of rallying the union, moving lines and innovating, and not a mere manager or moderator. The new century will be unstable. The rules of the world game which originated in Europe and America are already being thrown into question.”

Mr Blair, who has never publicly said that he wants the job, believes that speculation is pointless until after the Irish referendum when it will become clear if the post is going to exist. His aides say he is not seeking such an appointment.

He also recognises, however, that Europe was at last able to punch its weight under Mr Sarkozy in recent months and that Mr Obama has made plain he wants a strong EU partner to help him do the “heavy lifting” needed on Iran or Afghanistan.

Mr Blair staged a two-day charm offensive in Paris last week, chairing for Mr Sarkozy a conference on the economic crisis that was attended by Angela Merkel, the Chancellor of Germany. Last year Mrs Merkel told Mr Sarkozy that she would not back Mr Blair.

The crises of recent months have changed the picture by showing that with Mr Sarkozy in charge, Europe can hold its own as a power in the world. Mr Blair made the point in a tribute to Mr Sarkozy in an article for Time magazine. “Under his leadership, Europe looked as if it were acting in concert,” he said.

Yesterday Mr Blair had to endure similarly effusive praise from Mr Bush, who said: “The former Prime Minister of the United Kingdom will stand tall in history. And today the United States of America proudly honours its gallant friend.”

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