One more chapter in the saga of Tony and Gordon

Exactly 20 years after they were elected as fresh-faced MPs and agreed to share a cramped Commons office, yesterday's announcement of government policy on the single currency marks another significant chapter in the story of Tony Blair and Gordon Brown.

The two main architects of New Labour were all smiles as they entered the Commons together yesterday and will today stage a rare, joint press conference to emphasise their unity on the euro. The partnership that dominates British politics is still intact, and has survived one of its stiffest tests.

Mr Blair won plenty of pro-euro window dressing but Mr Brown kept control of the five economic tests. Even though he will look at the euro issue again in next year's Budget, there seems little prospect of the tests being met by then.

The public unity belies real and serious tensions behind Downing Street's closed doors in recent months. Yet both the Prime Minister and Chancellor recognised, as they always do, that to differ publicly over such a pivotal issue would inflict grievous bodily harm on the Government. They both remember that when Margaret Thatcher fell out with Nigel Lawson, her own demise was not long delayed.

The Blair and Brown camps say the long negotiations over yesterday's Commons statement have brought the two men closer together again. "It works best when they hammer things out together, without their aides present," one minister said. But there is no doubt that the most famous political marriage of modern times hit a rocky patch last autumn, arguably the worst period of turbulence so far in the relationship.

Mr Blair and Mr Brown clashed over two big issues: foundation hospitals and university funding. "Gordon was drawing dividing lines between him and Tony, just as he did between Labour and the Tories when we were in opposition," one Blair aide said yesterday. The Prime Minister saw his Chancellor as an obstacle to his public-sector reforms.

Mr Blair said privately that while Mr Brown was "brilliant" at macro-managing the economy, he was not so good at micro-managing domestic policies. Mr Brown was described as "grumpy and sulky" by Blair aides. The Brown camp say he was unfairly criticised and denied he was playing to the Labour gallery. For example, he was reported to have given only lukewarm support to foundation hospitals when he appeared before a Commons committee. They insist he defended the policy, and worked hard to limit the Labour backbench rebellion over it.

Mr Brown's show of public support for Mr Blair over Iraq helped to calm nerves inside No 10. But the tensions were evident again when the Chancellor proposed that he announce his "not yet" verdict on the euro in his April Budget. Mr Blair suspected a bounce, and persuaded Mr Brown the time was not right during a war.

There were further suspicions in No 10 when the BBC reported that Mr Brown had convinced Mr Blair that Britain should not join the euro yet. The Prime Minister was evidently furious about a Teletext headline saying he had bowed to his Chancellor. The Treasury strongly denied being behind the BBC report. Whatever its provenance, the revealing thing is that Mr Blair believed the Treasury was responsible.

The next morning, with John Prescott's strong backing, Mr Blair tried to loosen Mr Brown's iron grip on the euro decision by involving the whole Cabinet in the decision. Then the Prime Minister and Chancellor felt obliged to issue a joint statement insisting they were united. It was unconvincing stuff. Peter Mandelson undermined the statement a few days later by telling lobby journalists that Mr Brown was obsessed with politics and had outmanoeuvred Mr Blair on the euro. After an initial flurry of damaging headlines, Mr Mandelson's intervention unwittingly helped to calm nerves. "In a funny way, it cleared the air and helped us pull together," said a Brown ally.

The Mandelson analysis was proved right in yesterday's statement which, despite the pro-euro window dressing inserted to spare the Prime Minister's blushes, was more on Mr Brown's terms than Mr Blair's.

The Chancellor had the upper hand because he had dealt it to himself in 1997, when he cooked up his five economic tests in a Washington taxi with Ed Balls , his closest aide. Officially, the policy announced in 1997 replaced the Tories' "wait-and-see" policy with one of "prepare and decide." But very little happened, even after Mr Blair and Mr Brown helped launch the "Britain in Europe" group in 1999. "We didn't prepare; that's why we can't decide now," one Cabinet minister said yesterday.

Some ministers believe that Mr Brown's dominance over the euro stems not from 1997 but from the tense and emotional period that followed the death of the Labour leader John Smith in 1994. Older and politically wiser than Mr Blair, Mr Brown had always been the senior partner in their double act. Yet he was in the wrong place, as a necessarily dour shadow Chancellor, when the music stopped and Mr Blair, shining as Home Secretary, seemed the right man to garner votes in Middle England.

Mr Brown bowed to the inevitable, giving Mr Blair a free run as the modernisers' standard bearer in the Labour leadership election. But his act of sacrifice over dinner at the Granita restaurant in Islington inevitably left scars that have not completely healed. It seems some people in the Blair and Brown camps have been scratching at them again in recent days.

Last Friday, The Guardian published a briefing note drafted by Mr Mandelson the day after the Granita dinner. The leaked version showed that Mr Brown had amended it in his handwriting, replacing a statement that Mr Blair was "in full agreement" with Mr Brown's economic and social agenda with a harder commitment - that Mr Blair "has guaranteed this will be pursued."

But Mr Blair did not accept the proposed amendment, so Mr Brown did not get his written "guarantee," as The Independent disclosed on Saturday. The Guardian agreed, saying in an editorial that Mr Brown "wrote the G-word into the draft himself and even allowed his minions to brief one or two journalists that it was part of his agreement. But it was not. Mr Blair did not sign off on the change. He refused to sanction Mr Brown's language."

There is also a dispute over whether Mr Blair pledged at Granita to stand aside for his partner at some point. Some Brown aides claim Mr Blair promised to go after 10 years as Labour leader (which would run out next year) or eight as Prime Minister (until 2005). According to Blair aides, he hinted only that Mr Brown's decision not run for the Labour leadership would not prevent him becoming leader and Prime Minister at some point.

Inevitably, the question of the succession has become entangled with Mr Brown's and Mr Blair's fraught debate over monetary union. On more than one occasion since the 2001 general election, the Chancellor has asked Mr Blair when he intends to quit. Mr Blair sees taking Britain into the single currency as both his and the country's "destiny." His aides are convinced that Mr Brown wants to steer Britain in - but as Prime Minister, not Chancellor.

And so the impasse over the euro continues. It was not resolved by yesterday's announcement. There are occasional hints from the Blair camp that he has become so exasperated with Mr Brown acting as a "roadblock" that he has even considered moving him from the Treasury.

But that would solve nothing. It would destroy the partnership, since Mr Brown would probably go to the backbenches rather than accept the Foreign Office. It would make it even harder to win a euro referendum. Mr Blair knows that Mr Brown would be his trump card. In turn, Mr Brown knows that he has a veto.

Mr Blair, it seems, has decided to use his persuasive skills on his Chancellor, to cajole him along the road to euro membership. But it looks like being a long journey after yesterday's statement.

And so the partnership continues, perhaps strengthened by the run-up to the euro decision. We have been round the euro course before and will doubtless do so again, perhaps now on an annual basis since the issue will be reviewed in each Budget.

Although Enoch Powell famously said that all political careers end in failure, there is still scope for a Hollywood ending to the Blair-Brown story. Mr Blair calls his referendum a year after the next election and wins it with Mr Brown's backing. Then he departs and the Chancellor finally becomes Prime Minister. It could well happen.