Sterling ambiguity disappoints EU

The contradictory signals being sent out by the British government about sterling's participation in the single currency will be disappointing to Europe's political leaders, but hardly unexpected. But they will also call into question the aspiration of the British Prime Minister, Mr Blair, to be seen as one of the leaders not just of Britain but of Europe.

British participation from Day One would have given added authority to the euro on world markets and helped legitimise the project among Europe's still sceptical citizens. And this week's budget projections made it clear that there would be no problem with the Maastricht criteria.

It has been clear for some time, however, that even if the political circumstances were ripe, Britain would not be able to join from the start as it simply does not have the time to make all the practical preparations.

The question is then whether it would be possible to join in 2000 or 2001, ahead of the next general election and the introduction of the new banknotes and coins, and whether Mr Blair could make this clear ahead of the British assumption of the presidency in January.

Ambiguity or a negative response by Labour would make influence from the chair at key decision-making meetings far more difficult, most notably next May Day's decision on who will be in the first euro group.

"If you give the impression that you are not going to be there for quite a long time - four or five years - there's no doubt that your role in Europe is diminished," the British Trade Commissioner, Sir Leon Brittan, told GMTV yesterday. "You cannot be a leader in Europe if you regard yourself as a semi-detached member."

Others are likely to be more circumspect for fear of embroiling themselves in internal British politics.

But Mr Blair has not only promised to lead a new Britain into the promised land, but, in his first visit to a European summit, in Noordwijk in May, he promised to lead a new Europe, too.

There is no doubt that he has impressed his fellow leaders at their meetings, not just with the scale of the defeat of the Tories but his clear energy and dynamism.

But he has also irritated not a few with his preachiness and repackaging of old wine in new bottles. Labour's "new" jobs initiative has the character of a classic Commission vintage.

Political authority has to be earned, and last week at the Council of Europe summit Europe's two heavyweights, President Chirac and Chancellor Kohl, sent a clear message that Mr Blair has yet to win his European spurs with the announcement of an annual meeting between the two of them and President Yeltsin.

The crucial decision to limit enlargement of the EU to five or six countries is expected to be taken at an informal meeting of Europe's foreign ministers in Luxembourg this week, even as the hopes of swift and certain entry are being raised by the EU Commission in Romania and Bulgaria, which are not in the first batch of new entrants.

The ministers are expected to endorse the Commission's earlier recommendation to limit the first wave of enlargement to "five plus one".

This means the Czech Republic, Hungary, Poland, Slovenia and Estonia, plus Cyprus, pending settlement of the island's GreekTurkish division.