Blair tries to cool euro debate as split with Brown widens

The Government's policy on the single currency was plunged into confusion yesterday after Tony Blair and his ministers told supporters of British entry to "cool it".

Although Downing Street has privately encouraged pro-euro campaign groups to "up the ante" after Mr Blair's landslide general election victory, the Treasury is alarmed and has launched a counterstrike by playing down the prospects of early euro entry. "There is arm-wrestling between No 10 and the Treasury," one minister admitted last night. "The Government is sending conflicting and confusing signals. We can't go on like this for much longer."

The "cool it" message was issued as Mr Blair faced his European counterparts for the first time since the general election landslide, at a summit of EU leaders in Gothenburg. His approach to the euro is likely to irritate other prime ministers, who have given him the benefit of the doubt over the past four years.

The summit was marred by serious rioting as protesters and police fought in the city centre. Stones, bricks, and firecrackers were thrown at police, and shop windows, banks and hotels attacked by masked demonstrators. The violence, blamed on a hard core of between 200 and 300 troublemakers, broke out when a group tried to march on the conference centre, which was sealed off by a steel fence.

Mr Blair condemned the "thuggery" of the rioters as the Battle of Gothenburg raged for the second day. He said the protesters were "misguided" and "a threat" because they wanted to disrupt meetings that were about opening up markets and creating jobs. Jack Straw, the Foreign Secretary, described the demonstrators as "an anarchists' circus that goes around European capitals causing trouble".

Mr Blair gave his support to Peter Hain, the minister for Europe, who issued the call for a cool, hard-headed debate on the euro. "He is absolutely right," said Mr Blair. "The policy has not changed and will not change."

Mr Hain said: "My message is that everybody should cool it. The media, who are reporting this in a frenzied fashion, the pro-euro people who say we should just rush into it and name a date seven days into government, and the anti-European movement who say we should never go in." Mr Hain said people should "calm down" and allow the Chancellor, Gordon Brown, to make an assessment of the Government's five economic tests for joining the euro, which will be completed within two years.

Mr Straw agreed that there could be no "rushing fences", saying: "Two years has 731 days in it. We have been in government for seven days. There is a difference."

The ministers' calls were intended partly to bolster the pound, which had fallen to its lowest level against the dollar for 15 years amid City speculation that Mr Blair will seek early British membership of the euro. Yesterday sterling rose to its highest level against the dollar for more than a week, bouncing back almost four cents after interpreting the ministers' remarks as a more cautious approach to entry.

After Mr Blair's election triumph, other EU governments hope he will signal in the next few months that he will try to take Britain into the single currency. But the Prime Minister insisted there was "absolutely no pressure on that at all" during yesterday's summit.