Speaking on BBC One's Panorama, Tony Blair said: "We remain ready to carry on this campaign, and are utterly determined our demands will be met in full."

Terms were set out last Thursday for the withdrawal of Serb forces from Kosovo by Europe and Russia.

Prime Minister Tony Blair: "We are totally determined our demands will be met in full by Milosevic"

It was approved by the Serb Parliament last week, but talks collapsed on Sunday after President Milosevic said he wanted to keep extra troops in Kosovo.

Mr Blair said one of the reasons he had been cautious over the agreement was that "nobody trusts Milosevic".

President Milosevic: May comply with Nato's demands again

"I totally understand why they don't trust him," he said. "It was understood last week that Milosevic had met our demands," said Mr Blair. "But he wants to keep his troops in Kosovo.

"That is totally unacceptable. All of the people who have committed atrocities have got to go."

Lieutenant-General Sir Mike Jackson, who commands Nato's K-For peacekeeping force being assembled in Macedonia, has also sent out a message of no compromise.

"The Serb assembly took (the peace agreement) by 2-1," he said. "The Yugoslavs at the moment aren't willing to put into effect the mechanism to make it work.

"We are waiting to hear from them. Frankly I have got no more to say to them."

TA 'call-up'

Back in the UK, contingency plans for extra troops in Kosovo are being made. Senior military sources said 8,000 Territorial Army (TA) troops could be called up if Nato is forced to make an opposed invasion of Kosovo.

A senior military source said: "We are drilling down through the chain of command in Britain to gauge the number of people available and in what units they are based.

"They would be needed in the Balkans in the event of Option B Minus - an aggressive invasion force for an opposed entry into Kosovo.

"This is contingency planning, people are not being called up but the plans are being laid, thought out and can be acted upon if needed."

'Milosevic back in line'

But on Monday, Downing Street said President Milosevic may be moving towards compliance with the agreement's terms.

Mr Blair spoke by telephone to the Finnish President, Martti Ahtisaari, after the EU's Balkans peace envoy had spoken to President Milosevic.

UK Government officials say "the indications from Mr Ahtisaari's call to Milosevic were that Milosevic was getting back in line".

The prime minister's spokesman said "work on all the options continues to be carried out" as the search for a resolution to the crisis continued.