Midway through his first term as Britain's prime minister, Tony Blair rode a new subway line one morning and, surrounded by reporters, tried to converse with the lone passenger in his car. The woman, wearing headphones, seemed to purposefully ignore him, refusing to respond--even when Blair persisted, practically jumping up and down before her eyes and begging her to chit-chat.

Politicians mingle with ordinary people awkwardly here, if at all, and Blair vigilantly looks out for opportunities to shatter stereotypes. After all, he is the first leader of the Labour Party ever to win re-election as prime minister, and his latest victory, on June 7, gave fresh legitimacy to his campaign to democratize this still shockingly hierarchical and elitist country and to "reconnect," as he puts it, people with politics.

Ordinary citizens ignore Blair at their peril, however, as this poor woman found out.

Prime Minister Tony Blair SION TOUHIG/GETTY IMAGES

The next day, Blair summoned her to 10 Downing Street. By then London's tabloids had splashed her picture across the country, and her employer had professed puzzlement over her inability to connect with the prime minister. The woman defended herself, saying she recognized Blair, and meant him no disrespect, but preferred silence to conversation. (While Blair humiliated her, essentially making her stay after class as punishment, at least he didn't hit her. During the campaign, Blair's deputy prime minister knocked out a heckler with a right cross.)

As these anecdotes suggest, Blair is no man of the people. But since there is no term limit for a British prime minister, pundits already talk confidently of Blair winning a third term. His dominance of British politics--no prime minister in 20th century ever won such large majorities in two successive elections--confirms that he is the most significant leader in Europe today. Neither Lionel Jospin nor Gerhard Shršder, the prime ministers of France and Germany, command Blair-like support among voters, and Romano Prodi, president of the European Union, is appointed.

That Blair is aligned with the left, through the Labour Party's historic base, makes his position all the more significant. In a period of neoliberal economic crisis--when the terms of globalization are routinely called into question even by the engineers of corporate dominance, and economic growth is slowing across the world--Europe potentially offers a powerful counterweight to Washington's version of laissez-faire. But while Blair once talked about finding "a third way" between corporate capitalism and socialism, he now seems content to revel in Britain's benign combination of low unemployment and low inflation, ignoring the country's low productivity and low living standards.

Blair's first four years in office, while bringing an end to 18 years of Conservative Party rule, were marked by caution. The Financial Times recently set the terms of the prime minister's predicament: "Blair was frustrated during his first term by his inability to convert good intentions into changes. ... His dilemma over how radical to be is complicated by evidence that genuine radicalism makes the public uneasy: part of Mr. Blair's appeal is that so far he has been a reassuring figure, avoiding steps that make the British people feel they are being led into the unknown."

Blair's caution has overshadowed his rhetoric. In his first term, he ran a fiscal policy that made Margaret Thatcher proud: holding a tight rein on spending and applying the government's huge surpluses to the reduction of federal debt. He ostensibly expanded local democracy, by ceding powers to new provincial governments in Scotland and Wales, but then sought to override local preferences by naming his own men to run these power centers. He tossed out hereditary peers from the House of Lords, yet refused to favor the election of members to this appointed body. Even as he exhorted the British to take welfare into their own hands, he gutted the government's own Freedom of Information Bill, ordered the national police to spy on and jail those lawfully protesting ultra-high gas taxes, and opposed the expansion of local democracy in England itself.

If Blair lacks the ideology and inclination to energize a European alternative to American-style globalization, he also lacks a commitment to the 50-year project to create a united Europe. Britain refused to join the common currency, introduced in 1999, and Blair hasn't fully committed to replacing the pound with the euro. Instead, he endorses a referendum on membership, which effectively dooms the proposition since 70 percent of the British electorate want to keep their currency. To be sure, the euro's falling value against the dollar (it trades at more than one-third below its inaugural rate) makes the currency seem dicey, but to German and French politicians this is all the more reason for Blair to stop wavering.

On the future organization of the European Union, Blair remains a stubborn enigma. He opposes both the French plan to centralize the union, making it in the words of Jospin an "economic government," and the German plan to create a "United States of Europe," where states have limited authority over some matters and none over others. Blair's inaction lends support to the "Euro-skeptics" in Britain, whose ranks have swollen on his watch. The latest polls show almost half of the British public wants to withdraw from the European Union, and nearly everyone wants to go slow on further European entanglements. (Indeed, a vocal minority favors joining the United States, or at least swapping the pound for the U.S. dollar and trading membership in the European Union for membership in NAFTA.)

While Blair steadfastly expresses his allegiance to the European ideal, he talks most passionately not about Europe's prospects, but about Britain's "pivotal" role in world affairs. It is the opportunity to continue Britain's "special relationship" with the United States that most animates him. His quick support for military intervention in Kosovo held NATO together, overriding German reluctance. His willingness to unilaterally send British troops to Sierra Leone, preventing the collapse of the government and a resumption of civil war, rescued Washington from having to come to the West African country's aid. And he has left unchanged--over the public objections of other E.U. members--the long-standing U.S. "Echelon" program, whereby electronic surveillance of telecommunications in Western Europe is conducted from listening posts in Britain. (As George W. Bush's visit to Europe in mid-June underscored, differences between his administration and Europe's political elite are sharp, ranging from fears over the president's obsession with missile defense to his support for the death penalty to his stubborn insistence on downplaying global warming.)

Blair's stance on Europe matters because the grand European project--the idea of forming a multinational empire, stretching from Dublin to St. Petersburg--is once again in crisis. On the same day as Blair's historic re-election, Irish voters soundly rejected the so-called Treaty of Nice, which endorses the eastward expansion of the European Union. Following the Irish vote, Prodi dismissed the results, saying the European Union would "pursue the enlargement negotiations with undiminished vigor and determination," implying that no mere plebiscite would be allowed to derail expansion. The threat looms that the European Union will divide over whether to include the former Communist states of Central Europe and the Baltics.

Yet while clashes over E.U. expansion grab headlines, perhaps more worrisome is the quickening economic crisis in Europe, of which the falling euro is merely a symptom. With growth falling sharply in Europe's core countries, the E.U. social-welfare model faces renewed stress. The boom years of the second half of the '90s, coupled with the collapse of East Asia's economies, eased pressure on Europe (yet Germany, for instance, still met its budget requirement only by borrowing). Indeed, rising tax revenues and rising employment reduced the burden of paying for social services and transfer payments that are essentially twice as costly as those provided by the United States. With stagnation looming, Europeans must confront anew the basic contradiction of their political-economic model. Having embraced growth led and managed by corporations rather than government, the European Union and its member nations have few levers to influence the economy when the private sector buckles.

For Blair, the confusion over Europe's direction is a reminder of the political risks involved in trying to stake out bold positions in the "Old World." Europeans remain cautious, wary of social innovation no matter how much they acknowledge the necessity of adaptation. Yet paradoxically, the European Union stands as the world's most ambitious post-Cold War political project. The European Union may set the standard for how power-sharing and cooperation between nations can ease tensions and exploit synergy within geographic regions, while at the same time both preserving and transcending limited national interests. Given Tony Blair's habit of defending Britain's independence from Europe, it is ironic that he may end up deciding whether the European Union ever realizes its great promise.