Blair successor must rethink Europe policy-report

LONDON, Dec 19 (Reuters) Prime Minister Tony Blair's foreign policy has failed because of his inability to influence Washington and his successor must rebalance British interests between the United States and Europe, a report said today.

The Chatham House think-tank said in a wide-ranging analysis of Mr Blair's foreign policy that he was the first to recognise how the United States would react to the September 11 attacks.

But the influential London-based institute said the Prime Minister had made a mistake in failing to coordinate a European response that might have tempered Washington's actions.

Chatham House concluded that the US-led invasion of Iraq was a ''terrible mistake'' leading to a ''debacle'' that will have repercussions on policy for years.

''The root failure (of Blair's foreign policy) has been the inability to influence the Bush administration in any significant way despite the sacrifice -- military, political and financial -- that the United Kingdom has made,'' the report said.

''Tony Blair has learnt the hard way that loyalty in international politics counts for very little,'' it said.

Mr Blair has been forced to say he will step down next year after a decade in power, partly in response to public and Labour Party anger over his unflagging support for the Iraq war.

The Chatham House report also said Mr Blair had been slow to realise the consequences of a Taliban resurgence in Afghanistan on the back of drug-trafficking.

It said this was ''unforgivable given the link between heroin consumption on British streets and the strengthening of warlordism in Afghanistan''.

The Prime Minister, who is in the West Asia in a bid to breathe life into the peace process, has also been unable to prevent Britain's standing there from declining sharply, according to the study.

The report concluded that Blair's successor must forge a closer relationship with Europe.

''What US governments want is a European Union that can make a real contribution to the international political and security agenda, and any European government with the diplomatic skills to deliver EU support will be hugely appreciated.'' It said the next Prime Minister had a chance to put Britain in that role, so long as the country is taken seriously by its European partners.

To achieve that, the report said, Britain would have to reconsider its opposition to joining the euro zone and remove border controls within the European Union.

This is likely to be uncomfortable for the two main candidates to be Prime Minister.

Labour's Finance Minister Gordon Brown has loudly criticised lagging euro zone performance while making no secret of his leanings towards the United States.

Opposition Conservative leader David Cameron has indicated his preference to align with eurosceptic European parties.

REUTERS PKS BST0636