Behind the concessions, some unsettling detail for Blair

Sweeping changes to the way the European Union works were unveiled yesterday. The updated version of a draft constitution for Europe provoked anger from Eurosceptics and from federalists.

In a carefully crafted bid for the centre ground, Valery Giscard d'Estaing outlined proposals that include a range of concessions to Tony Blair, but also elements that will unsettle Downing Street.

The blueprint includes plans to create a new president, or chairman, of the European Council, where national governments meet, and for an EU "foreign minister".

After further discussions in the convention that M. Giscard chairs, the final version of the document is due to be presented to EU leaders at a summit in Greece next month. They will take the final decisions although they are likely to negotiate over several months.

Mr Blair, whose Europe policy has come under attack from the Eurosceptic press, can draw comfort from several concessions. In the updated constitution's first article the word "federal" has been excised because of its politically explosive connotations. It has been replaced by a reference to the EU using the "Community way" - Brussels jargon for a system that involves the European Commission and Parliament as well as member states.

After British protests the document makes clear that member states "confer competences" upon the EU - rather than the other way around. Plans to entrench the powers of national parliaments have been strengthened. They will have recourse to the European Court of Justice to back any complaint that the EU is encroaching on their domain.

But article seven calls for the EU's Charter of Fundamental Rights to be written into the second part of the constitution and given legal force - something that is still being resisted by the Government.

On defence the document proposes a mutual defence clause - something Britain argues is unnecessary because such a guarantee is already provided by Nato.

The language on defence is also certain to be opposed by the Government. The latest text calls for the "progressive framing of a common union defence policy", adding: "This will lead to a common defence, when the European Council, acting unanimously, so decided." The same article notes the "obligations of certain member states which see their common defence realised in Nato". Meanwhile, on economic policy the Government will fight to tone down the bold formulation that "the union shall have competence to co-ordinate the economic and employment policies of the member states." This "may" be extended to social policies, it adds.

Several other important changes, which are not opposed by the Government, feature in yesterday's document. The EU is given a "legal personality", which allows it for the first time to sign treaties and sit on international bodies. And the document outlines the primacy of EU over national law. Governments recognise this as a fact of life and, as M. Giscard's spokesman, Nikolaus Meyer-Landrut, put it: "This is not an innovation but a description of the state of affairs we are in."

More of the treaty will be published today, but yesterday's text drew fire from both sides of the broad debate on the future of the EU. Andrew Duff, a Liberal Democrat member of the convention and a supporter of European integration, described it as "a very feeble effort", and predicted that it would attract "2,000 amendments" and will be given a negative reaction when the convention discusses it on Friday.

David Heathcoat-Amory, the Conservative Eurosceptic MP on the convention, said the document outlined a steady drift in competences and added: "This reinforces the need for the final decision to be taken not by the Government, with its evasions and excuses, but by the people in a referendum."