Oskar mortifies Tony and his pal Gerhard

Until a couple of weeks ago few people outside Britain's political and chattering class had ever heard of Oskar Lafontaine

Until a couple of weeks ago few people outside Britain's political and chattering class had ever heard of Oskar Lafontaine. But by yesterday Germany's new Finance Minister was splashed across the front pages of the popular press - firmly established as worthy successor to Jacques Delors, the new Bogeyman of Europe.

The Potsdam declaration and subsequent Brussels "ambush" left Mr Blair's government in disarray, if not in full retreat - struggling to balance its "at the heart of Europe" ambitions with blunt warnings to its supposed centre-left allies to keep their hands off Britain's tax regimes.

Ahead of Prime Minister's question time yesterday afternoon, Downing Street attempted to recover some composure - with Mr Blair's official spokesman attacking "hysterical" press coverage of the Franco-German push for European tax harmonisation, insisting this was "a story in large part about Germany" itself.

But that was only after the press had faithfully reported Mr Blair's fury at Mr Lafontaine's threat to outflank the British veto with a call for increased decision-making by majority vote. "Not a cat in hell's chance" was the verdict originally attributed to a spokesman for Mr Blair, while Chancellor Brown, we were reliably informed, had simply told his German counterpart to "get lost".

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There seems little doubt as to where the hysteria first took root. Nor is there is any obvious reason to distrust the "line" attributed to other unnamed Whitehall sources, to the effect that "Red Oskar" is something of a loose cannon, proving an embarrassment to Tony, and to Tony's pal Gerhard Schroder.

Given Oskar Lafontaine's powerful domestic role as "king-maker", there were few takers for that notion yesterday - though its attraction to the Blair government was obvious as it surveyed the damage done to its carefully-nurtured pro-European policy.

Suddenly Tony's "friends" had gone off-message. After all those warming lectures delivered in fluent French, the launch of those Anglo-German committees, and the much-vaunted hopes that Britain would join the French and Germans in the European engine room - ministers were left reaching for the "V" word, with Chancellor Brown, only recently denounced as a raving Euro-enthusiast, sounding as Thatcherite as Mr Blair.

All that was missing was the famous handbag, as the Sun led the tabloid declaration of war. In the tradition of its front-page classics, the paper had a simple message, which it would impart just once: "Foxtrot Oskar". Nor was the paper alone in rounding on the Downing Street "fantasy" that Britain could avoid "the nasty parts of the single currency". The Daily Mail, to which Number 10 pays more than passing attention, informed its readers that the British veto on taxes "is under threat". While from the pro-European corner (yes, there is one) the Guardian announced the European "showdown" and the arrival of Mr Blair's "moment of truth".

In the general rush to defend the fiscal beaches, there were probably few inclined yesterday to reflect that Mr Lafontaine's plans have yet to pass the Bundestag, much less enter the agenda for a serious European negotiation or to allow that tax harmonisation is not the necessary consequence of the single currency, or that, in any event, harmonisation is not necessarily code for tax uniformity.

The disposition, to the contrary, will be to believe that Oskar Lafontaine has let the cat out of the bag, spelling out in honest terms the ultimate political, social and tax implications of the grand design for an evermore-integrated Europe.

That disposition is well entrenched. Norman Lamont is remembered for singing in the bath - famously regretting nothing about the events of "White Wednesday" and Britain's costly and humiliating ejection from the ERM. He might also be remembered for his disdainful dismissal of the pretensions of John Major and Douglas Hurd as they maintained they were winning the argument in Europe.

There were, he said, basically two views about the EU and its future development: the British view, and the view generally held by the rest of Europe. In private at least, pro- and anti-Europeans alike conceded that the former chancellor had the essential truth of the matter.

And Lord Lamont was doubtless singing joyously again yesterday as he savoured the pretensions of another British Prime Minister and another Chancellor still more brutally punctured.

For it was only on Tuesday that Gordon Brown dismissed press "scare stories" about tax harmonisation and the threat to the British veto, insisting he was "winning the argument that the way forward for Europe is through economic reform and not tax harmonisation".

There are arguments Mr Blair can and should win in Europe. But as events this week have shown, the British sense remains of a constant argument not with, but against, the rest. The resultant embarrassment for the London government underlines its uncertainty about the state of British public opinion - and the distance Mr Blair has still to travel if he is to deliver on his early promise to carry a "yes" vote for membership of the single currency.