The BBC's Jacqueline Hewer: "It's the end of the dream for Ron Davies"

He has also issued an appeal for the former Welsh Secretary to be allowed privacy to rebuild his life.

"This has been a week of very great personal agony and tragedy for Ron Davies," the prime minister said.

"I think he has handled the situation with a great deal of dignity and would have won a lot of respect from people for the way that he has dealt with it."

Speaking at the launch of a training initiative at the Chelsea Football Club ground in west London, Mr Blair added: "He has paid a very heavy price for what's happened and I know a lot of people in Wales will respect enormously the way he has come through this."

"I hope he is allowed to rebuild his life with his own family."

Mr Blair deflected further questions about the future of the leadership in the Welsh Assembly, saying they were "for another time."

The BBC's Wales Correspondent Wyre Davis reports on the Ron Davies saga

Mr Blair's comments came as Mr Davies was preparing to explain to his constituency supporters why he quit the race to become leader of the Welsh assembly.

Mr Davies, who resigned on Tuesday after making an "error of judgement" on Monday night which involved a meeting with a stranger and led to his car being stolen, is understood to have told friends the last few days have been "torture".

He is expected to tell Caerphilly Constituency Labour Party "nothing improper or illegal" took place.

After his resignation from the Welsh Office he apparently retained the hope that he could weather the storm and bounce back to become Wales's first chief minister.

The tabloids have kept up their pressure on Mr Davies

But two days of what he described as "lurid and inaccurate" newspaper headlines led him to decide on Thursday night to withdraw his candidacy.

Talked things over with family

Mr Davies made the decision after discussing matters with his wife Christina and Labour Party colleagues in Wales.

One friend of Mr Davies said he will "never understand why he allowed himself to get into the situation he did last Monday evening".

The BBC's Jon Sopel discusses the implications of Ron Davies' resignation on Radio 4's Today programme

He said those events would "haunt him for ever".

The Caerphilly MP has been urged by the media and some of his colleagues to give a fuller explanation about Monday night's events.

Mr Davies says he was robbed at knifepoint by a gang after befriending a stranger on Clapham Common - a well known haunt of London's homosexual community.

'No sex or drugs involved'

He admitted making an "error of judgement" but has denied the encounter had anything to do with sex or drugs.

Five people have been arrested by police investigating the incident. Three were released on police bail on Wednesday. No charges have been brought.

Rhodri Morgan discusses the race for Wales's top job with Jeremy Paxman

Mr Davies is under no pressure to stand down as MP for Caerphilly but there is widespread relief in the Welsh Labour Party at his decision not to run for the assembly.