David Cameron attempted to reposition the Conservative Party on Europe yesterday in a way that would appease the eurosceptics while offering concessions to the party's pro-European wing.

In his first policy speech on Europe since he became leader in 2005, Mr Cameron pledged to reverse the transfer of sovereign powers to Brussels as part of a new generation European Union.

He complained that the EU as it was currently constituted was too inward looking, bidding for more power, creating new institutions and trying to breathe life into a constitution which was effectively dead and buried.

Speaking at the Movement for European Reform (MER) which he launched last year with the ODS, a right wing party in the Czech Republic, Mr Cameron argued that he wanted to see a 3G Europe' concentrating on globalisation, global warming and global poverty.

While Mr Cameron was in Brussels, the Prime Minister met Fredrik Reinfedlt, the Swedish Prime Minister, in Downing Street to reach agreement on climate change targets.

Later Tony Blair criticised Mr Cameron, telling him he could only influence European policy if was at the top table.

"To work in the European Union you need allies and the problem with David Cameron's position on this is if you end up getting out of the group which has the German, the French, the Swedish conservative parties in it, you are not going to build the allies you need in order to make a difference to effect change in (the EU)," he said.

Mr Cameron said the MER was setting up an independent European Reform Commission - and one of its jobs would be to review the range of EU powers and see how they could be made reversible.

He said: "The European Union needs to change if it is to be fit for the challenges of the new century, not stuck haggling over the debris of the last. There is no case for the constitution ... That means putting an end to the sense that Brussels is a ratchet, accruing more and more powers to itself at the expense of national or local governments," he added.

Sir Menzies Campbell, the Liberal Democrat leader, said: "The Tories are split from head to toe on the issue of Europe. If David Cameron is serious about reforming the EU, he needs to put his party at the heart of Europe and not at its margins.

"It is naive for Mr Cameron to think he can reform Europe to tackle issues such as climate change when he is in partnership with parties that don't believe in it," he added.

Gary Titley, the Labour leader in the European Parliament, described Mr Cameron's call for a 3G EU as a typical soundbite - trite, empty and riddled with hypocrisy.

Peter Mandelson, EU trade Commissioner, said he agreed with Mr Cameron's globalisation agenda but said the Tory leader risked denying the means needed to achieve globalisation goals.

"The EU needs to be properly equipped to fulfil its role in relation to the global economy, global warming, and global poverty. This requires rule-book changes. Few in Europe are advocating a whole new constitution but we should acknowledge the difference between this and the more limited institutional reform needed to create a more effective EU," Mr Mandelson said.