"We need a new Marshall Plan for Kosovo, Montenegro, Macedonia, Albania and Serbia too, if it turns to democracy," Mr Blair said in a speech in Chicago.

His comments came as Nato cautiously welcomed news from Russia that the Yugoslav leader has agreed on the need for an "international presence" in Kosovo.

Tony Blair: "This is a just war"

Speaking at the Economic Club of Chicago, Mr Blair said success was the only exit strategy Nato was prepared to consider in the Kosovo conflict.

"We will not have succeeded until an international force has entered Kosovo and allowed the refugees to return to their homes," he said. "Milosevic will have no veto on the entry of this international force."

The prime minister stressed the necessity of working on what comes after the Nato success in Kosovo.

Reports on Friday said Nato is devising a $15bn aid package to ensure stability in the Balkans.

The Times cited German sources which said the money would be handled by an institution modelled on the agency which managed the Marshall Plan after World War II.

Mr Blair also urged support for a "democratic, outward-looking, prosperous Russia".

Russian envoy Viktor Chernomyrdin said Belgrade was ready to accept an "international presence" in Kosovo under the control of the United Nations, after he met Yugoslav President Slobodan Milosevic.

Mr Chernomyrdin gave no details on the nature of the proposed international presence, nor whether it would be an armed force.

US President Bill Clinton said if the report was true, it was the first acknowledgement by President Milosevic that there would have to be an international security force in Kosovo.

He added that such a force should contain troops from other Slavic nations such as Ukraine and Russia.

A statement from Yugoslav President Slobodan Milosevic's office, however, made no mention of any international force and gave no indication the Yugoslav leader had softened his hard-line stance.

Jackie Rowland: Chernomyrdin may have succeeded where others failed

Correspondents say it is not clear yet what conditions would be attached, or whether Nato countries would be allowed to join.

But they say if President Milosevic does support such a proposal it could represent a significant move forward. Until now he has refused to accept foreign troops on Yugoslav territory.

British armour on route to the Balkans

The US and UK Governments have backed a review of Nato's plans for the possible deployment of ground troops in Kosovo.

US Secretary of State Madeleine Albright confirmed the decision at a joint news conference with UK Foreign Secretary Robin Cook in Washington on Thursday.

Military commanders were instructed by Nato Secretary-General Javier Solana to revive plans for a ground intervention in the province.

Current estimates suggest 200,000 Nato troops would be needed for a full-scale invasion of Yugoslavia while only 75,000 would be needed for a limited campaign in Kosovo.