He is expected to tell the EU to stop looking in on itself and remind MEPs about the competition it faces from countries such as India and China.

His speech to the European Parliament comes ahead of EU leaders' summit.

The BBC correspondent in Strasbourg says that the continuing delay in reaching an agreement over an EU budget hangs over all discussions.

Mr Blair is expected to say the EU has no choice but to face the growing challenges from India and China.

He first delivered the warning to the European Parliament back in June, but since then critics across Europe have said that the UK presidency has not pushed the reform agenda ahead.

The EU leaders' summit starts at Hampton Court near London on Thursday.

Budget delay

The BBC's Tim Franks says frustrated British diplomats insist there have been several achievements but there is no doubt that the continued delay in reaching agreement on a budget for the EU hangs over all discussions.

He says the British argue that you cannot work out a budget until you work out what you want to spend money on.

Officials point approvingly to a recent suggestion from the European Commission - the bureaucracy at the heart of the Union - that a new globalisation fund be set up to help deal with the economic shocks caused by international competition.

Mr Blair's official spokesman said: "We will do whatever it takes to reach agreement.

"Obviously this is a very ambitious agenda, we make no bones about that. It will involve a lot of clear thinking and a lot of determination in the EU as a whole."

The spokesman said Mr Blair would be "mapping out how we see the next two months and where we need to move to the next stage in that two months".

But our correspondent says the prime minister knows that he faces sceptics on both sides of the economic debate.

(BBC)

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