Dusk or dawn for Europe?

John Major last night warned that the European Union faced political break-up and economic disaster if it took the wrong decisions on further integration and the single currency.

In a doom-laden and highly negative statement to a Dublin summit press conference, the Prime Minister drew a clear election line between himself and the Labour leader Tony Blair and, by hinting at possible British withdrawal, answered some of the deepest fears of his Euro-sceptic rebels.

Mr Major's warnings came as other EU leaders declared a historic breakthrough in preparing for the single currency. In a two-step advance towards the single currency, the designs of Euro banknotes were unveiled in Dublin, and the disciplinary rules for policing the euro zone were finalised.

The Prime Minister was cautious about the design of the money and added:"I am not immediately any more enthusiastic about the notes than I was about the name."

Calling a surprise press conference in the middle of a summit session at Dublin Castle, Mr Major said that after President Chirac of France had urged colleagues to dump their pre- prepared speeches, he had delivered his strong message on the political road ahead.

The choice that had been presented was between political union and a free-trade area, and neither route was acceptable to the United Kingdom. Nor was it acceptable that some "centralist and integrationist" countries should hijack the union, creating an inner core. "The right flexibility," Mr Major said, "will ensure that those who wish to integrate are not unreasonably ... frustrated.

"But it also means that others who do not wish to integrate are not forced into unwished-for obligations which are unattractive to their electorates, unappealing to their governments, and which build up resentment across Europe."

He then added his direst warning yet: "The wrong sort of flexibility would blow the European Union wide apart, and so tread carefully."

While the United Kingdom has the power to veto any change that it does not want, talking up the threat of break-up serves the distinct political purpose of distinguishing the Tories from Labour - and marking Mr Major as a defender of the Euro-sceptic faith against the depredations of Brussels.

For good measure, he also told the press conference of his fears for the single currency - delivering a speech he had not made inside the conference hall.

Again talking-up his fears of hazards ahead, Mr Major said that the creation of a single currency would be the most far-reaching decision that could be taken. "It will dwarf the earlier decisions that have been reached," he said. While he expected the UK to qualify for entry, he doubted the target 1999 start date and repeated that he would take no decisions until all the facts were known.

Meanwhile, however, EU leaders, entirely undeterred by Mr Major's onslaught, agreed detailed plans for their so-called stability.

The pact, finalised after a Germany accepted a compromise, sets out rules and fines for countries that join the single currency. John Bruton, the Irish Prime Minister, said progress yesterday "shows political will exists to make the euro project work".

Mr Bruton said it had been an "exceptionally successful day" for the EU and Mr Major had made a "very good contribution" in talks on reform.

Mr Major, however, warned that it was no good some countries reaching the qualification targets for single currency if they could not be sustained.

Some countries had made "Herculean efforts" to meet the targets, but Mr Major added: "Insisting on a particular timetable for political reasons is not sensible and can end in disaster ... Once a country is in, the only safety valve for poor economic performance would be higher unemployment, and the risks are obvious.

"I don't think anybody would sensibly wish to gain a political triumph by meeting a particular date for economic and monetary union if it is followed by economic disaster thereafter."

The dire nature of Mr Major's warnings will serve to heighten his European colleagues' keen anticipation of Mr Blair as his British replacement after the next election.

Dick Spring, Ireland's Foreign Minister, reflected the views of many when he said that the Labour leader would provide Europe with a positive new contribution from Britain.