A man of vision but without the tact to see it through

WAS this the most dangerous man in Europe? The demonisation of Mr Oskar Lafontaine has been surprisingly intense, led with its usual scant regard for the facts by the British tabloid press.

Not so, says Labour's spokesman on finance, Mr Derek McDowell, who describes his genial German comrade as "a breath of fresh air".

I recall a recent occasion in Brussels after a monthly meeting of Socialist finance ministers when he teased his Irish companions about how Ireland was poaching German jobs.

At the time, Mr Lafontaine was in the thick of the major public row about EU tax harmonisation that turned him in tabloid eyes from simply "Red Oskar" to public enemy number one.

Yet, while the Germans had a legitimate case that their tax base was being eroded by other member-states, Mr Lafontaine's hamfisted insistence on pressing the issue publicly fuelled Euro-scepticism in Britain.

Diplomacy, Europe observed, was not the Finance Minister's strong card. And although many of his fellow ministers may have privately agreed with his criticism of the European Central Bank's refusal to cut rates, his hectoring style simply embarrassed them.

Yet, Mr Lafontaine does represent an important strand of European socialist thought that is quite different from the predominant Blairite and Schroderite passivity in the face of the markets. That has made him a natural ally of his French counterpart, Mr Dominique Strauss-Kahn.

Mr Lafontaine's departure marks a shift to the right not just in the German government and social-democracy, but in European social-democracy.

The resignation comes at an awkward time for the EU. Delicate negotiations on Agenda 2000 are coming to the point where all the skills of the German presidency will be required. On Monday, the finance ministers are due to meet in Brussels to kick-start the final stages of the talks. Now there will have to be a new chair.

Lara Marlowe adds from Paris:

France reacted with alarm to the resignation. Although there was no official government reaction, French media portrayed Mr Lafontaine's departure as a major crisis and the culmination of the long-running power struggle between him and Mr Schroder.

The political differences between the pragmatic, centrist "New Left" Chancellor and his more orthodox left-wing finance minister have fascinated the French left, who since returning to power in June 1997 have slowly shifted towards the political centre while avoiding open ideological rifts. "What is interesting is that to win the election [the German Socialists] chose the more realistic of the two and they ended up in this mess," Mr Francois Hollande, the leader of the French Socialist Party, commented.

The affection of France's ruling coalition may have been for Mr Lafontaine, but in practice, French policies under the Prime Minister, Mr Lionel Jospin, have been surprisingly liberal.

Mr Hollande expressed satisfaction that Mr Jospin has managed his coalition better than Mr Schroder. "In Germany they have been in power for six months, and they're having a hard time," Mr Hollande said, citing nuclear taxation issues and relations with Green party coalition partners. "I hope that they sort it out because when a government goes through a crisis - especially when it is on the left - all of Europe is concerned, France is concerned and the left is concerned."