Cook warns that UK risks isolation in Europe

THE UK risks almost total isolation in the European Community within a year, according to senior sources in the European Commission.

The Independent on Sunday has been told that, far from leading in Europe, Tony Blair's government increasingly risks marginalisation.

Commission sources claim there is growing irritation among French, German and Italian ministers at the Government's dithering over the Euro and a growing concern that the UK will only ever be a reluctant partner in Europe.

Robin Cook, the Foreign Secretary, is understood to have recently briefed the Cabinet that there was a real "possibility that Britain could be marginalised in Europe".

Mr Cook was asked to give the briefing by the Prime Minister. He is thought to have emphasised that, by the next election, Britain could be the only EU state not in the Euro.

A senior Foreign Office source said: "There is a window of opportunity, but it will not remain open forever. We can't park in our current position forever.

"If the UK doesn't hold a referendum early in the next term then all the signs are that France and Germany will raise the hurdle for entry into the Euro to a politically unacceptable level."

The source added: "If Germany, France and Italy move towards fiscal union - in other words, tax harmonisation - it would be almost politically impossible for Britain to join."

At the moment 11 out of the 15 EU member states are part of the Euro, but Commission sources expect Greece to join by March 2001 and the Danes and Swedes to hold referendums in the spring of 2001. At the moment the British government has only committed itself to a referendum if the economic conditions are right in the next term.

There is also the possibility that former Eastern bloc states such as Hungary and Poland could join the Euro before Britain. Hungary's leader has already stated his intention to join the EU and the single currency in rapid succession.

Britain's increasing isolation on this issue will be highlighted at a European Council meeting in Helsinki next week, when Tony Blair and Gordon Brown will be attacked for refusing to support plans for a Europe-wide 20 per cent tax on savings citizens hold in other EU countries.

The British government believes that the proposed new tax would undermine the London financial markets.

Romano Prodi, the European Commission president, who was the Prime Minister's choice, is so annoyed by Britain's stance that he has called for the national veto on tax issues to be taken away.

The German chancellor Gerhard Schroder used a speech to the Bundestag on Thursday to claim that Britain's "intransigence" was damaging Europe.

Senior Foreign Office sources confirmed that British diplomats stationed abroad were increasingly reporting that there is a growing feeling of "unease" amongst our European allies over Britain's apparently "negative approach" to European-wide issues.