Denis MacShane: There is light at the end of the European tunnel

The economic story is bad compared to the US. Like Russia of the Sputnik era, when Khrushchev promised to bury the West, the sudden appearance of Chinese graduates by the million are invoked to prove that it is game over for Europe's social market economy.

The politics appear even worse. The Germans fail to chose a clear government. France has not one but two dauphins hoping to inherit the throne in the Elysée. Italy rewinds to the 1990s to put up Romano Prodi as the nation's new saviour. The Poles elect a president who wants to see capital punishment restored and wants to take on Berlin and Moscow simultaneously. In Britain, new anti-EU campaign groups open store, while Britain in Europe shuts shop. The new Tory leader-in-waiting announces he wants the Conservatives to break all links with their fellow right-wingers in Europe.

The Nonistes - those who say No to Europe are everywhere. No to the constitution. No to opening up trade in services. No to Peter Mandelson negotiating a deal on world trade.

And yet, in the midst of this enduring negativity about Europe, something is stirring. Six months ago it was taboo for a British minister to say the rebate was negotiable, or that Europe needed an energy policy or support for workers displaced by globalisation.

Now Tony Blair has rewritten the Whitehall lexicon on Europe. He has made clear the rebate can go provided the whole of the EU budget is reshaped with no off-limits areas for the agro-protectionists. When Margaret Thatcher told the Commons she had obtained the rebate in 1984, she reported to MPs that Britain had won the prize "because we are seen as very pro-European". Mr Blair is showing, at last, some real pro-European leg.

This week he told MEPs that Europe needs an energy policy. Who wants a politics of every-nation-for-itself in any energy crisis this winter? He has endorsed a long-standing demand for an EU solidarity fund to help workers displaced by globalisation. He has hailed the EU military missions overseas and EU diplomacy in handling Iran - all the more actuel given the Iranian government's new threat to relaunch the Holocaust against Israel. Energy, helping workers and EU foreign policy were all previously red lines for Whitehall.

From avian flu to immigration, the facts of modernity are plunging a dagger into the heart of the Eurosceptic arguments denigrating the EU and promoting the nation über alles line of the Rothermere columnists. The Turkish and Croatian premiers attended Hampton Court. Soon the blue flag of Europe with will be seen in every corner of the Balkans and Turkey.

Blair is using Tippex to white out the red lines that have always left Britain lagging rather than leading in Europe. Despite the sermons and occasional bluster from London about how the rest of Europe should embrace Britishness, the powerful arguments that ministers can make have not been heard because of the widespread impression that Whitehall was more obsessed with defending its red lines than in being an effective networker or team-player in Europe.

As British growth slows to French levels, there is growing realisation that we may be all in this together. High unemployment and low growth, especially in Italy and Germany, eat into British economic prospects. Germany, after all, is the second biggest purchaser of what we make in Britain after the US.

The notion that Britain can stand tall in the good ship Europe while others are half under water no longer makes sense. Getting Europe moving again - economically and politically - is now about British prosperity and national survival in a world of fast-moving change in terms of trade, demography, societal, cultural and religious upheavals.

The old pro- and anti-EU debates are out of date. Britain needs to accept its full responsibility as a leader in changing Europe. Mr Blair appears to have accepted that challenge. But if Hampton Court and his speeches to MEPs are stand-alone events and Whitehall rediscovers the pleasures of red lines, then it will be business as usual. Pro-Europeans need to rediscover their confidence, their energy and their style. Europe needs a networking Britain and Whitehall and Westminster should help to reinvent the European Union before it is too late.

The writer was Europe Minister 2002-2005