People must be comforted about job fears, says Mr Mandelson

The former UK Cabinet minister told Reuters compensation would have to go to those losing Common Agricultural Policy (CAP) payments.

He is also urging Europe to change its social policies to make economic reforms "bearable" to people.

Tony Blair has warned Europe has to change or fail on a "grand scale".

'No tap'

The European Union had to face up to the challenge of globalisation, Mr Blair said as he outlined the agenda for the UK's six-month presidency of the EU.

The UK prime minister has said he is ready to discuss reducing the British rebate from the EU but only if there is CAP reform too.

But in a speech to the European Parliament in Brussels, he said ending subsidies overnight would be absurd.

Ideals survive through change. They die through inertia in the face of challenge Tony Blair Q&A: EU budget rows In full: Blair speech Watch the speech

Mr Mandelson echoed those words in his interview with Reuters.

"The CAP is not like a tap that can be turned on and off and certainly not overnight," he said.

"You have to put in place compensatory and flanking measures which cost ... and it's a cost in order to carry out reform and lower expenditure in the medium- to long-term."

'Avoid sink system'

Mr Mandelson also says rapid economic change needs to be cushioned by changing social policies.

He told BBC News: "We need more open markets, we need greater innovation and higher productivity growth in Europe if we are going to take on the huge competitive challenge that we are facing from China, India and elsewhere in Asia.

"We also need social policies and social action to flank these economic policies. People need to be equipped for this sort of change.

"They need to see that change is being managed and we are not just turning our economy and society into one of winners and losers where the losers simply sink to the bottom.

"That is not the sort of the society we want in Europe."

Most of those social policies could be shaped at a national level, said Mr Mandelson, but Europe could help create a consensus for change.