Blair warms to the euro

TONY BLAIR yesterday gave his warmest embrace yet to British entry into the European single currency as he sketched out a seeming deal with his European Union peers to prepare the British people for the demise of the pound.

The Prime Minister described the launch of the single currency as a "turning point" for Europe. It would help generate stability and growth, Mr Blair told his 14 colleagues at the opening session of the European Council in Cardiff. He said: "EMU's success is crucial to high levels of growth and employment."

That enthusiastic endorsement contrasted with interviews he has given in the run-up to the summit, in which he rejected suggestions that the Government was prevaricating on membership, and stuck to the line that the country would make up its mind on joining "when the conditions were right".

One factor behind the change of tone is a desire to put as positive a shine on the current British EU presidency, whose last hurrah is the Cardiff summit. But in recent days the Prime Minister has admittedthat Britain will pay a price in lost influence inside the EU for its refusal to join the single currency at the outset.

Another reason too is the deepening financial crisis in Japan and Asia. The Nikkei index fell below the psychologically important 15,000 level as the yen weakened to its lowest level against the dollar for eight years.

The turmoil represented the greatest risk to the world economy since the Latin American debt crisis of the early 1980s, Mr Blair said. "Our economies will not emerge from this turmoil without being affected by it, and we have to decide how we intend to react.

"The single currency will help generate stability and growth," he added.

But he said it must be matched by sweeping economic and political reform - underscoring his insistence that if Britain is to join EMU, the rest of Europe must move towards two longstanding demands of the Labour government: the spread of more flexible "Anglo-Saxon" notions of work and competition through the Union, and the forging of a genuine "people's Europe".

As a first step towards bridging that gap, Mr Blair won agreement yesterday for a special informal summit in Innsbruck this October that would explore ways of devolving power from Brussels. "The electorate wants to be a part of a strong Europe but feels remote from its institutions. The gap has to be closed if the EU is to command support for its decisions," he said.

Thus has the Prime Minister neatly regained the initiative from President Chirac and Chancellor Kohl, who in a joint letter earlier this month themselves came out against a single European superstate.

Mr Kohl is said to have argued that "subsidiarity" - the doctrine whereby decisions should be taken at the most appropriate level - had to be "made real".

This is very much the UK line, and British officials insist the stance is not born of anti-Europeanism (banished, they say, with the last Tory government) but from a desire to make Europe work better.

This in turn would help build support for the single currency, which is still opposed by more than half the electorate. "When you take such a step as a single currency, you have to make sure the electorate is with you every step of the way," Mr Blair's spokesman declared.

Kohl's demands, page 11

Asian crisis, page 16