Blair is "deeply worried" UK may leave EU: paper

Former Prime Minister Tony Blair waves as he leaves a Diamond Jubilee lunch with Britain's Queen Elizabeth and Prime Minister David Cameron and former Prime Ministers Gordon Brown and John Major at Downing Street in central London on July 24, 2012.

BERLIN (Reuters) - Former British Prime Minister Tony Blair told a German newspaper he was "deeply worried" Britain might opt to leave the European Union in a referendum, particularly if too many powers were transferred to Brussels without democratic legitimacy.

Talk of Britain leaving the EU was once farfetched, but the euro zone debt crisis and the prospect of the currency bloc forging a closer political union have convinced some senior UK politicians it is time to demand a new relationship with Brussels.

Current Prime Minister David Cameron said last month it was a "perfectly honorable position" to call for an immediate referendum on Britain's EU membership - something polls show a majority of British people would vote to reject - but that he would never campaign for an "out" vote because leaving the EU would not serve British interests.

Blair told Die Zeit it was clear that the euro zone crisis would lead to a "powerful political change of the EU", adding: "And on this point, I am deeply worried that Britain could decide by referendum to leave the whole process."

"If more competences are transferred to the EU, then its democratic legitimacy must be built up too," he said, according to a German transcript of the interview which is due to be published on Thursday. "Britain must play a strong role in this. Because we need a balance between European institutions and the nation states."

"If this is done wrongly, we could create a political crisis that could become just as a big as the euro crisis. People will not go along with the abolishment of the nation state."

Cameron has tried to stave off demands for an immediate vote on Britain's EU membership by holding out the prospect of a referendum sometime in the future and by promising a new relationship with the EU.

He vetoed a new EU fiscal treaty in December, forcing euro zone states to set their new rules outside the formal EU structure, while using its institutions.

Skeptics say EU regulations shackle Britain's $2.5 trillion economy and that leaving the 27-nation bloc would allow London to restore its sovereignty while saving billions of dollars in membership dues.

However, supporters of membership argue Britain would lose influence if it left the EU, its biggest trading partner, and that its economy would still be influenced by rules made in Brussels anyway.

(Writing by Sarah Marsh; Editing by Andrew Osborn)