Europe: both sides go to war

The Conservative leadership's patched-up truce on Europe was ripped apart by Malcolm Rifkind, the Foreign Secretary, yesterday. Opening a day of government disarray, he broke last month's even-handed Cabinet approach to a single currency, suggesting for the first time that ministers opposed the principle of a single currency.

Cornered by a charge of neutrality in a BBC radio Today interview, an irritated Foreign Secretary said: "No, we are not neutral. We are actually on balance, we are hostile to a single currency, but we accept that you have to think very carefully about these matters before you rule it out completely."

That contradicted the carefully crafted formula agreed by the Cabinet on 23 January, when John Major said: "It is very unlikely but not impossible that the single currency can proceed safely on 1 January 1999, but if it did proceed with unreliable convergence we would not of course be part of it."

Mr Rifkind's one word, "hostile", created consternation and confusion in Cabinet ranks. But, in spite of efforts to dismiss the controversy, he gave a more considered view in a Bonn speech, in which he repudiated Conservative support for "pooled sovereignty" and cited the words of a Sun opinion column, without identifying the source, to represent the view of British public opinion.

Some ministers were more circumspect in their reaction. Michael Heseltine, Deputy Prime Minister, said during a visit to Hulme, in Manchester, that the Government was not hostile to a single currency.

But the Conservative Party chairman, Brian Mawhinney, said in Wirral South, the by-election seat, that Mr Rifkind "was speaking on behalf of the Cabinet". Back at Number 10, the Prime Minister's office could not say whether Mr Major backed Mr Rifkind - but Kenneth Clarke, Chancellor of the Exchequer, said: "It was obviously a slip of the tongue under pressure from a very skilful interviewer ...

"The position remains that we have an open option. We might join; we might not. It rather depends on the best judgement we can make about British jobs and prosperity when the right time comes."

Mr Clarke reiterated the previous line: "The Government doesn't have a hostile attitude to the single currency. The Government has a policy of negotiating and then deciding one way or the other at the proper time."

But when Mr Major later arrived at a Lancaster House conference on racism, he suggested the balance of proof had tilted against a single currency - that it would be wrong until proved right. "The balance is that we at present have sterling. People will have to show to us that it will be positively beneficial to change. The balance of the argument would have to show that it was beneficial to justify a change and that is the point Malcolm Rifkind was making."

John Redwood, the former leadership challenger, said there had been a clear shift of policy. "Always before, the Government has said they don't think a single currency is very likely," he told BBC radio. "Today, [Mr Rifkind] said the Government was `hostile' to it. I find that most encouraging."

Tony Blair told BBC Radio's The World at One: "We have had three different statements from the three most senior people in the Government ... It is a quite extraordinary situation ... "