Blair calls for directly elected EU president

Tony Blair has suggested that an elected European Union president would be "the most direct way to involve the public" in closing the bloc's democratic deficit and could form part of a "grand bargain" of deeper economic and political integration in the wake of the eurozone crisis.

Speaking in Berlin at the Council for the Future of Europe, a gathering of senior politicians organised by the Nicholas Berggruen Institute on Governance, the former prime minister of the United Kingdom claimed the crisis was an "opportunity finally to achieve a model of European integration that is sustainable".

Blair said the "incremental" approach to solving the crisis favoured by leaders including German Chancellor Angela Merkel was politically sensible – but a more dramatic "grand bargain" would better restore the confidence of markets and the public. Fiscal transfers, banking union, coordination of economic policy and structural reforms should all be part of the solution, he said, but austerity measures should be back- rather than front-loaded "to protect growth".

However, he warned that there could not be large scale integration of economic policy without a similar level of political union. "As Europe integrates, there opens up a democratic deficit between the importance of the European-wide decisions and the accountability of the European institutions making them," he said.

A Europe-wide election for the presidency of the European Commission or the European Council would be "the most direct way to involve the public", said Blair, who was a widely-tipped candidate to be president of the council before Herman Van Rompuy was selected for the role and could be a frontrunner again in the future. "An election for a big post held by one person – this people can understand." It is not the first time he has made the suggestion but the comments come amid renewed speculation about his own ambitions.

Blair, who was leader of the UK's Labour party between 1994 and 2007, and prime minister for a decade from 1997, acknowledged the difficulties of creating a more politically integrated Europe. "In the minds of the people, there is no plainly unified, homogenous polity in the way there is, for example, in the United States," he said, adding that "the danger is that the more we talk of bringing Europe closer to the people, the more the people feel alienated from it".

He also warned that the EU would be "on a path to break up" if the eurozone and the rest of the bloc became "fundamentally divided politically as well as economically" – instead advocating a settlement that "accommodates different levels of integration" within the wider union. The UK should play a "constructive role" in bringing this about to avoid being sidelined, he said.

In spite of the ongoing economic crisis, Blair insisted that the "underlying, profound rationale" for the EU's existence was "stronger than ever" and the Eurosceptics were on the "wrong side of history". "The 21st century case for Europe is based not on war or peace but on power or irrelevance," he said.

"A 21st century with China and India that in time, as gross domestic product and population size realign, will become vast economic and political powers; with Brazil and Russia behind; a country like Indonesia with a population three times that of Germany; nations like Mexico, Pakistan, Nigeria and Vietnam, all bigger than any European nation – in this new 21st century geopolitics, Europe carries weight, multiplies opportunity and makes sense for individual nations," Blair said.