Victory for Chirac as he sends EU reforms back to the drawing board

Claiming victory for his vision of Europe protected from the excesses of free markets, the French president, Jacques Chirac, has exhorted France's voters to back the European constitution in a crucial referendum in May.

Claiming victory for his vision of Europe protected from the excesses of free markets, the French president, Jacques Chirac, has exhorted France's voters to back the European constitution in a crucial referendum in May.

At the end of a fractious two-day summit in Brussels, EU leaders handed the French president a political victory by agreeing to his demands to re-draft controversial, British-backed, plans to open up a big chunk of the European economy to competition.

With opinion polls predicting a "no" vote in the referendum, M. Chirac exploited his success with a bullish performance in which he outlined his vision of a Europe able to tame the worst excesses of globalisation.

He said that a planned European directive to liberalise the market in services would now have to go "back to the drawing board". And he promised voters that the new constitution "will seriously increase social requirements, social guarantees and reduce the risk of aggravating social problems".

He also warned that "if France blocks the further construction of Europe the consequences would be far-reaching". The president's comments followed a tense series of meetings in which M. Chirac portrayed himself as the defender of social protection and welfare standards. In private comments, reported by EU diplomats, he declared that "ultra-liberalism is the communism of our age".

That sentiment was echoed during a debate over dinner on Tuesday, when M. Chirac argued that the neo-liberal economic agenda would explode like Communism. At one point, when the discussion turned to the European "social model", Tony Blair asked pointedly: "What's that?"

As well as signalling a leftward drift in social and economic policy, yesterday's summit agreed environmental targets extending beyond the Kyoto protocol which runs until 2012. EU leaders said industrialised countries should reduce their greenhouse gas emissions by 15 to 30 per cent by 2020 compared with emissions in 1990.

But, intended to relaunch a scheme to revitalise the European economy, the summit was dominated by economic issues and in particular the so-called services directive. The measure is designed to break down the barriers to trade in services - which accounts for 70 per cent of European jobs - and allow firms from one EU nation to offer services in another.

Britain supports the plan which, it argues, could create 600,000 jobs. But the proposed legislation is acutely unpopular in France where it has crystallised fears that east European firms could move into their markets, offering cut-price services by employing people under their own terms and conditions.

Though several EU leaders confirmed that the proposed directive will be redrafted, there was no detail on the extent to which it will be watered down.

M. Chirac said he had resisted efforts by some countries to make a pledge to maintain the "country of origin" principle. That ensures that, for short-term employment, foreign companies can operate under their own national laws across the EU. "We won't accept this reference," he said. The summit accepted that the directive as currently drafted did not meet with the requirements of the European social model.

While Mr Blair left Brussels without speaking publicly, M. Chirac outlined his economic vision at a press conference. He argued: "Globalisation is an evolution. It can be seen as positive if it was really controlled, managed and humanised, which up to now is not the case."

He said: "We can't continue to have a system where money is concentrated among the rich and population is concentrated among the poor. It will explode.''