Blair squares up to rising euro-scepticism

The British Prime Minister will today initiate his government's fightback against a rising tide of Euro-scepticism, but will resist calls for a more positive approach to Britain's joining the euro.

In Mr Tony Blair's first important speech on the European Union since Labour was defeated by the Conservatives in elections to the European Parliament, he will argue "the case for positive engagement in Europe".

"The forces of anti-Europeanism have to be challenged," said his official spokesman. But Mr Blair will simply restate formal policy on European monetary union, which is that the UK will join when the economic conditions are appropriate.

"If we get to the stage of a referendum on the single currency, that is going to be a huge battle of public opinion," said his spokesman. The outgoing European commissioner for financial affairs, Mr Yves-Thibault de Silguy, yesterday warned that the UK's decision not to join the euro at the start "may be the European tragedy of the present generation of British leaders".

In a speech in the City of London, Mr de Silguy said the single currency had changed the dynamics of Europe, shifting more power to countries that had joined the single currency. The euro had thus acquired political consequences. "The UK should be particularly alarmed by the danger of a two-speed Europe," said Mr de Silguy. The history of its membership had always been "about catching up, forcing UK policy into line with measures already agreed by others".

Mr de Silguy denied he was trying to put pressure on the UK to adopt the single currency. But he claimed power was already shifting away from Ecofin, the committee of all EU finance ministers, to the smaller Euro-11 group which includes only euro zone members. The longer the UK stayed out, the higher the price would be in terms of lost influence.

Mr Blair's spokesman responded that Mr de Silguy appeared to be arguing that the UK should be in the single currency now, regardless of economic conditions and that was " not a sensible position".

Mr de Silguy said UK independence on monetary affairs was becoming increasingly theoretical. "The pound is becoming a minor satellite of the much larger euro. Interest rate decisions by the European Central Bank have an immediate effect on the UK economy, but the Bank of England is not consulted."