European commission president Romano Prodi yesterday demanded "real economic government" for the European Union.

Prodi called for greater economic powers for Brussels and warned that the euro could fail unless member states' tax and spending policies were brought under tighter EU control.

"Without continuous integration, the single market will disintegrate and the euro won't be able to play the global role for which we created it." the European chief said in Paris.

Prodi also said that the time was now right for a fully-fledged "political union", a "Mr or Ms Euro" to speak on behalf of the single currency abroad and "the creation of a European tax" to fund the commission's annual £65 billion budget.

Foreign secretary, Robin Cook, was swift to dismiss Prodi's tax plans yesterday as the Labour party moved to disassociate itself from the federalist agenda.

Tony Blair last night said that Britain should have "sufficient self-confidence, sufficient self-belief to go into Europe and win the argument" against such plans.

However, William Hague said only his policy of non-cooperation with the EU would prevent the flow of more powers to Brussels.