The former prime minister claimed the Tories lost their majority in the election because large numbers of people voted to deny Theresa May the mandate for a so-called “hard” Brexit.
Mr Blair suggested the “will of the people” may be changing as the difficulties of Brexit negotiations become apparent and called for a “proper debate” over the different options, including remaining in a reformed EU.
The only reason it is not on the table is because the Tories fear old internal wounds would be reopened if Brexit does not happen, he said.
The former Labour leader also criticised his party’s vision of a “jobs first” Brexit outside the single market, calling it a “contradiction in terms”, and said he was “dubious” about the idea that it helped win over Remain and Leave voters in the General Election.
Pro-EU voters will eventually begin to understand Labour holds the “same damaging position” as the Tories, to leaving the single market to end free movement, and the party should instead champion a “radically distinct” position on Europe.
“Rational consideration of the options would sensibly include the option of negotiating for Britain to stay within a Europe itself prepared to reform and meet us half way,” he wrote in an article for his Institute for Global Change.
“The Macron victory changes the political dynamics of Europe.
“The members of the eurozone will integrate economic decision-making.
“Inevitably, therefore, Europe will comprise an inner and outer circle. Reform is now on Europe’s agenda.
“The European leaders, certainly from my discussions, are willing to consider changes to accommodate Britain, including around freedom of movement.
“Yet this option is excluded.”
Mr Blair’s article was published alongside polling which suggested 70% of Britons would support free movement if it was reformed to mean EU citizens would not have an automatic right to move to a country without a job offer, and if there were stricter controls on welfare.
German and French voters would favour similar controls, the polling suggested.
“We are all learning, as we proceed, the damage Brexit will do,” Mr Blair said.
“Europe knows it will be poorer and less powerful without us.
“We know our currency is down around 12%; already jobs are going; there is not £350 million a week more for the NHS; and we actually need most of the migrants who come to work in the UK.
“On any basis, leaving is complex and will take years.
“Brexit is the biggest political decision since the Second World War.
“Given what is at stake, and what, daily, we are discovering about the costs of Brexit, how can it be right deliberately to take off the table the option of compromise between Britain and Europe so that Britain stays within a reformed Europe?”
• The Luntz Global Partners poll surveyed 3,026 British, German and French nationals in May and June, weighting the survey to represent 1,000 from each country.