Britain's learning curve during EU presidency

Just at the point when the European Union is embarking on its most ambitious piece of integration it has initiated a high-level political discussion on how its structures may be brought closer to the people. This paradox, which combines a centralised bank executive with renewed fears in the larger member-states about too intrusive a Commission in Brussels, perfectly expresses the dilemmas which faced the UK's presidency of the EU over the last six months.

There is certainly a new tone in the Blair government's approach to EU business, after it went through a considerable learning curve during its term in office. This could be seen at the Cardiff summit which concluded it. Two important signals were put out from there: Mr Blair's endorsement of the euro as a force for stability in a world economy buffeted by the Asian financial turmoil, and the congruence of British proposals to reform the EU's institutional and management structures with those of other member-states. Both were delivered in a participatory fashion, free of the apparent insouciance for others' interests that annoyed a number of important players earlier in the presidency.

Many observers took the positive messages on the euro from Mr Blair, the Foreign Secretary, Mr Cook, and the Chancellor of the Exchequer, Mr Brown, as the beginning of their effort to engineer a change in the British public mood on the matter. Opinion polls still show a majority of voters opposed; and it is widely understood that decisive political leadership will be required to shift their attitude.

By the same token there is a greater understanding that the wait-and-see policy on the euro articulated last October is passing its sell-by date. As the Financial Times put it this week, although Mr Blair would argue that his government is working to erode differences which make it difficult to align sterling with the euro he also wants to give the impression that the real choice on EMU need only be made next century and that he can govern until then as if all options are open. "That is an illusion. His policy goal is already set. He wants to lead in Europe, and he knows he cannot do so unless Britain joins the euro as soon as it can," the FT said.

Its observation was sparked by an attack on Mr Blair's EMU policy in the Sun. It devoted three pages and an editorial to denouncing him as the "most dangerous man in Britain" and saying it will "fight, fight, fight" any attempt to abandon sterling.

An extraordinary political reality of his government is revealed in these exchanges. Mr Blair and his media advisers credit that newspaper's support in 1996 for convincing an important segment of the electorate to vote Labour. Since then they have paid close attention to keeping that paper on board. Mr Blair is more than willing to intervene internationally on behalf of British business, but he put himself out on a limb when he lobbied the Italian Prime Minister, Mr Romano Prodi, on Mr Rupert Murdoch's behalf last March when he was trying to buy a media company from fellow-tycoon Mr Sergio Berlesconi.

This was not mere cronyism, but based on the assumption that were Mr Murdoch to have more cross-European interests he might become less viscerally opposed to the euro and all it represents.

It was noted that the Sun has a new editor, who may have overplayed his hand on this occasion by giving Mr Blair too crudely hostile a bludgeoning and allowing him to declare that "newspapers are entitled to their view, but we have to govern in the national interest", as he put it in the Commons. Prime ministers versus press barons is a longstanding theme of British politics as Baldwin observed when he attacked Beaverbrook and Rothermere in 1931 for exercising "power without responsibility, the prerogative of the harlot throughout the ages".

Some such encounter between Messrs Blair and Murdoch was bound to come, but one should not underestimate the mindsets involved; too many anecdotes identify Murdoch's opposition to the euro as a crucial factor in Downing Street's political calculations. But if Mr Blair is indeed to engineer the shift in attitudes he will have to strengthen his resolve.

As the FT put it, "Even Mr Murdoch may eventually come round to the euro. And history shows that when the facts change, he appoints a new editor". Keynes it was who said: "When the facts change, I change my mind. What do you do, sir?" And Monnet remarked that the best way to negotiate with the British is first to establish the facts and then to rely on their renowned pragmatism to recognise them.

The key fact established during the British presidency was that the euro is going ahead with 11 member-states, excluding the UK. The Brussels summit, which selected Mr Wim Duisenberg and Mr Jean-Claude Trichet as the first chairmen of the European Central Bank, is widely regarded as having been mishandled by the British presidency. As a result the European Parliament has failed to pass a customary motion congratulating the UK presidency.

Although Mr Brown and Mr Blair have constrained the freedom of manoeuvre of the Euro-11 council of EMU states compared to the Ecofin council of ministers where all 15 member-states participate, there can be little doubt that the inner grouping will rapidly become more influential.

To engineer a positive British policy towards the euro in time to join as soon as possible, Mr Blair will have to alter the Bank of England's central terms of reference from inflation control to cyclical convergence. This, together with the need to run a stable exchange rate with the euro over several years, will change the budgetary arithmetic he needs to win the next election.

No wonder Mr Blair devotes so much effort to the constitutional changes he believes could marginalise the Conservatives for a generation - including, increasingly, plans to work together with, even to coalesce with, the Liberal Democrats on a programme of electoral reform.

This reform theme chimes in with the second message from Cardiff - the need to bring the EU closer to its citizens. It is to be the subject of detailed discussions on subsidiarity and institutional change among EU leaders. In Germany and France there is a truculent mood of hostility towards the European Commission, which provide the subtext of the letter from Dr Kohl and Mr Chirac to the Cardiff summit.

Mr Blair sees a quick-fix IGC on institutional reform as a means of keeping Britain at the centre of EU affairs, which is not available on EMU, the Schengen system of free movement, or on common foreign and security policy, where Britain's closeness to the US irritated other states.

But smaller states are worried about too close co-operation among the three largest ones. And, given the central commitment of France and Germany to develop political co-operation in and around the euro, there is a limit to what they can do under the heading of decentralising reform.