"This is a very important moment both for the European countries and for our other colleagues round the table," Blair told reporters on Monday at the end of a two-day Euro-Mediterranean summit in Barcelona.
"It's as strong a statement as you could possibly have on a unified determination to fight terrorism in all its forms," he added.
Agreement on the anti-terror pact had been held up notably by Arab states' insistence on wording giving legitimacy to resistance movements fighting against occupation.
Arab delegates sought to add a qualification, proposing text that said nothing in the anti-terrorism code contradicts "the right of peoples under foreign occupation to strive to end it in accordance with international law".
Prime Minister Blair said the deal
would help in fighting terrorism
The EU and Israel objected, saying that terrorism can never be justified. Diplomats worked into the night of Sunday and into Monday. When the leaders returned for a second day of talks early on Monday, there was still no agreement.
The 25-nation EU, meeting with 10 Mediterranean-rim and Mideast neighbours to mark the 10th anniversary of the so-called Euromed partnership, also agreed on a five-year work plan, the EU source said.
But sources said a planned joint declaration was to be replaced by a statement issued by the summit's joint British and Spanish chairmanship.
Summit participants had originally planned to issue a declaration of their common vision on the need for economic and political reforms in nations on the Mediterranean's eastern and southern rims. The countries have received 20 billion euros ($23.5 billion) in grants and soft loans from the EU since 1995 but remain mired in poverty.
Leaders from Egypt, Algeria, Israel, Jordan, Syria, Lebanon, Tunisia and Morocco stayed away from the summit, with reasons ranging from a medical problem for Algerian President Abdelaziz Bouteflika to political unrest at home for Egypt's President, Hosni Mubarak.
"It's as strong a statement as you could possibly have on a unified determination to fight terrorism in all its forms"
UK prime minister
The EU had high hopes for the summit, which assessed a decade of economic outreach that is widely regarded as having failed to deliver results.
In the years ahead, the EU plans to link its aid to economic and political reforms in countries that shed their authoritarian ways. Its aim remains, however, to craft a Euro-Mediterranean free-trade zone by 2010.