Europe's war on terror has fuelled racism and boosted the far right, a think tank has claimed.

Anti-racist campaigners are concerned that the EU's tough response to September 11 has damaged democratic traditions and revived "discredited" ideas on national culture.

David Blunkett's call for immigrants to learn English and "assimilate" has been singled out for strong criticism.

The Institute of Race Relations published a damning report, entitled "'Racism: the hidden cost of September 11", which says that asylum seekers are being singled out for harsh treatment.

It finds that Arabs and Europe's Muslim minorities have been the biggest losers. The report warns against a "culture of suspicion" in which anyone of Middle-Eastern appearance is treated as an "enemy alien".

Far-right and anti-immigrant parties have capitalised on September 11, the report argues, demonising Islam and its cultural and religious practises for electoral gain.

But racist politicians like France's Jean Marie Le Pen are not the only ones to blame, with the report's author Liz Fekete blaming Britain's home secretary for aiding extremism.

"The extreme-right are not alone in prioritising these themes," she said.

"We are entering a new era in domestic race policy, where old, discredited ideas of monoculturalism and assimilation into the dominant White, European Christian culture are once again in the ascendant.

Fekete warns that "the hidden cost" of September 11 is "unashamed racism".