Politics and economics intimately combine in the birth of the euro - not only within the broad framework of the European Union, but between Ireland and Britain as well.

Ireland's entry into the single currency expresses and confirms the Europeanisation which, over the last 25 years, has enabled the reduction of political and economic dependence on Britain, thereby gaining real independence by pooling sovereignty.

This Europeanisation process gave successive governments the political confidence to make historic compromises on Northern Ireland and has been a crucial prerequisite of the Belfast Agreement. It should be borne very much in mind as Irish-British relations are reordered by its implementation and an intensive diplomatic campaign is mounted from London to bring the two islands closer together.

The euro was conceived as part of a major geopolitical trade-off between German unification after the end of the Cold War and French insistence that it be accompanied by pooled monetary sovereignty.

It was the second such Franco-German trade-off in the history of European integration, the first having been built into the European Community's foundation, between German industrial and French agricultural interests.

Conventionally such trade-offs are described as political in economic commentary, notably by those who are sceptical about the euro project and its chances of succeeding. Once the political deal was done an economic framework was erected to justify it, they say.

Implicitly or explicitly such critics suggest this is the wrong way to go about designing a currency or an economic system. In Britain an influential stream of argument says the euro is a bad idea whose time has come, the wrong response to the end of the Cold War, which would have been better addressed by a rapid enlargement to take in the new central and eastern European states.

Such a crude distinction between politics and economics is quite inadequate to understand what is at stake in economic and monetary union.

Aside from the basic economic rationale for the single currency - to complete the single market and enhance the European Union's competitiveness, especially with the United States - it ignores the institutional, politically-defined setting within which economic activity takes place. Historical conjunctures such as the one that gave rise to the single currency reveal the deep inter-connectedness of politics and economics.

Britain, of course, secured its opt-out from that conjuncture at the Maastricht summit in December 1991, a manoeuvre famously described by then British prime minister, Mr John Major, as "game, set and match". It does not look as categorical a victory now that the euro has been launched according to the timetable written into that treaty at the insistence of former French president Francois Mitterrand. Since then, Britain has gone through an agonising debate on its proper position in Europe.

A far more Europhile British government under Mr Tony Blair has yet to resolve the question of British entry to the euro. Inescapably it has become bound up with the profound redefinition of Britain's state and political identity currently under way, which is likely to take at least five to 10 years to work out.

A quasi-federalising process of devolution, constitutional change and deeper European engagement is seen as the alternative to Scottish independence and therefore the break-up of the UK. If any one part of that agenda goes seriously wrong, it will affect the others; Mr Blair's political difficulties before Christmas illustrate how troublesome it could be.

Politics and economics between Ireland and Britain are also inescapably bound up with the reordering of Britain's internal and European relationships.

In his address to the Oireachtas on November 26th, Mr Blair fully recognised this. He said the broader agenda of changing Irish-British relations is predicated on the transformations in Northern Ireland but no longer defined by them. "Our common interests, what we can achieve together, go much, much wider than that," he said.

He called for much closer consultation and concentration between the two governments on EU matters. "Together we can have a stronger voice in Europe, and work to shape its future in a way which suits all our people," he said. None of this closer co-operation "threatens our separate identities. Co-operation does not mean losing distinctiveness".

This is intelligent for a British government anxious to cultivate friends in the post-euro setting prior to making its own decision about whether to join. Mr Blair's appeal should be seen in the context of his recent agreement with the French government to pursue closer defence and security co-operation within the EU (which may have been vitiated by the US-British attack on Iraq).

It should also be seen in the context of renewed discussion about Ireland rejoining the Commonwealth. Given that Ireland's separate identity and international distinctiveness have been so enhanced by Europeanisation over the last generation, what is the most intelligent Irish response to such British enjoinders?

That there is a tension between Ireland's European and Anglocen tric identities is well illustrated by the coincidence between participation in the single currency and implementation of the Belfast Agreement.

There is a clear political case for joining the euro ahead of Britain, in order precisely to reinforce Ireland's identity and distinctiveness, quite aside from the calculations of economic benefits.

Recent letters in the correspondence columns of this newspaper pose the issue sharply, indicating there is a real discussion going on in public opinion if not amongst the politicians. Thus Mr Vincent MacCarthy (December 29th, 1998) argues strongly against joining the Commonwealth on the grounds that joining a "British club would send completely the wrong signal to our mainland partners, particularly as EMU takes off with Ireland in and Britain out". Mr Laurence Glynn (December 15th, 1998) argues that politicians' professions of Europeaness are contradicted by the continued dependence of the indigenous economy on British markets, the failure to diversify away from it and the penetration of British goods in the retail sector.

In this perspective a decision to rejoin the Commonwealth looks ill-advised, or at best premature. It should be postponed at least until Britain's European and political identity questions are resolved - perhaps even until the United States decides to join.

Given the intimate relationship between Ireland's political and economic well-being and its European involvement it seems in the interests of this State to deepen its EU commitments along the lines suggested by Mr John Palmer in these pages on Wednesday. His critique of Irish attitudes to regionalisation, tax harmonisation, budget reform, EU enlargement and common foreign and security policy is a salutary reminder that the euro's introduction begins a new page in Europe's as well as Ireland's history.