Speaking after a meeting with Mr Blair in Downing Street, Mr Schröder said that the commissioners' resignation had to be acknowledged - and preparations must now be made for the appointment of a new commission chief.

He said: "We have to take that as a fact and now swiftly go in and nominate a new president for the commission."

The German chancellor also backed Mr Blair's calls for a further reform of the EU at the upcoming Berlin summit.

The BBC's Political Editor Robin Oakley reports on Mr Blair's calls for reform

The talks, which had been originally scheduled to cover the impending expansion of the EU, lasted for more than an hour and a half.

Earlier Mr Blair told the Commons a new "heavyweight" president of the European Commission is needed.

He told MPs current commission president Jacques Santer should stand down as soon as possible.

Ex-Trade Commissioner Sir Leon Brittan: Vice president

Mr Blair called on member states to seize the opportunity for reform presented by the current crisis.

Mr Santer could not be blamed for all the failings in the report as some of them pre-dated his time in office, said Mr Blair.

"The president of the commission should leave as soon as it is reasonably and practically possible and a new president should take his place," the prime minister told MPs.

'Decide by merit

He said a "political heavyweight capable of bringing leadership and authority to the commission" was now necessary.

Fundamental reform of the commission and the way its leaders are picked should follow, Mr Blair said.

Tony Blair: "Root and branch reform of the European Commission needed"

"I will be blunt. We cannot have the next president decided in the same way as the last.

"The top jobs should go to the top people - merit and merit alone should be the deciding factor.

"We heads of government should make it clear the commission president operates under a mandate for reform and is a reformer."

Mr Blair admitted the scale of criticism contained in the report was devastating.

Ex-Transport Commissioner Neil Kinnock: Not criticised in report

"The report could not be more clear cut. It has revealed system irregularities that have been concealed for too long."

"Seen intelligently, this is in fact an opportunity to make changes that many of us have argued for a long time and are overdue."

Conservative leader William Hague said Mr Santer should be forced to leave office immediately and not permitted to return.

'Cover-up stunt'

Tory Euro-sceptics took the opportunity to attack the commission with Lord Tebbit denouncing the mass resignation as "a cover-up stunt".

Edith Cresson: Commissioner at centre of allegations

The former Cabinet minister told BBC Two's Newsnight the EC and "the whole structure of Europe" is "institutionally corrupt".

And he dismissed as an "absurdity" Mr Blair's suggestion that the two UK commissioners, Sir Leon Brittan and Neil Kinnock, were without blame and should be allowed to carry on in their posts.

"They were culpable, they were there," complained Lord Tebbit.

Veteran Euro-sceptic backbencher Bill Cash said the commission had "demonstrated a complete contempt for the people of Europe."

But Labour MP Giles Radice, director of the pro-Europe European Movement, said: "It is right that the commission should resign. Their action shows that the European Parliament can assert itself and deal with problems in the executive."

Former Labour Cabinet minister Tony Benn suggested MPs should approve the names of UK commissioners before their appointment.

And Liberal Democrat foreign affairs spokesman Menzies Campbell said: "The European Parliament has come of age. The days of arrogant commissioners, answerable to no one but themselves, have come to an end."