John Rentoul: Ed is lost if Merkel pulls it off

I wonder whether David Cameron, when he went to Paris last week, had that feeling we have when we watch sport. We know that we cannot influence the result, yet we behave as if we can. Either we will our team to run the ball rather than pass (sorry, I watch American football), or we decide that we have jinxed our team and that if we carry on watching, they will lose (but we carry on watching all the same).

The Prime Minister's purpose in going to see Nicolas Sarkozy was to be photographed with him, to make it look as if Britain is a player, when really we are spectators only of the great battle to save the euro. It is the sort of thing that Cameron is good at: the use of language, including body language, to give the impression that he is in control. But Cameron knows that Sarkozy did not even think it worth their holding a news conference after their talks because they would have nothing to say; they both know that the big match is tomorrow, when Sarkozy meets Angela Merkel. That is hardly a meeting of equals either, but at least Sarkozy is on the pitch and not watching from row P, seat 34.

Almost from the moment he formed his government, Cameron has been in the strange position for a Eurosceptic of observing a crisis in the European Union and hoping that it doesn't get worse. The weekend over which the coalition talks were concluded, of 8-9 May 2010, was the very moment the Greek economy went phut (a technical term in macroeconomics).

For the past few months, as the break-up of the eurozone seemed more and more likely, Cameron has been reduced to saying that it would be bad for Britain if it happened in a "disorderly" way. At the same time he has not been able to offer any advice on how the euro might be broken up in an orderly way because: (a) he is a Eurosceptic; (b) Brits are not allowed to have an opinion on the euro because we chose not to adopt it, as Sarkozy told Cameron at their previous meeting; and (c) questioning the euro's survival is against the EU religion. Never mind that the euro's fate is of direct economic interest to us, fellow members of the EU.

So Cameron watches, waits and pretends to be engaged in important talks to "protect and enhance Britain's interests", while Merkel decides (with Sarkozy allowed to make suggestions about the numbering of clauses) what sort of treaty changes might be needed.

For a moment, early last week, it looked as if the euro might soon collapse. Wolfgang Munchau, European economic columnist of the Financial Times, gave it 10 days. When George Osborne delivered his Autumn Statement, the forecast from the independent Office for Budget Responsibility suggested that Britain would avoid a second dip of recession over the next six months. But the forecast was heavily qualified by a footnote, "Unless the euro goes belly up, in which case all bets are off," or words to that effect.

So, yes, it may be that the eurozone banks will collapse, the euro will break up in a horror story of law suits over liabilities, and the whole of Europe be plunged into what Ed Balls warns could be a depression as bad as in the 1930s.

However, it is also worth looking at another possibility. What if it all goes better than expected? What if Angela Merkel does know what she is doing, and manages to save the eurozone banks and keep the euro together, at least for a few years, which would be enough to allow confidence to return? What if the OBR's forecasts turn out to be wrong because they are too pessimistic? What if we have hit rock bottom already? What if continental and British economies start to grow again? What if last week's good jobs figures in the US are the cock-crow of a new dawn of boom?

The trivial consequence will be that George Osborne's Plan A will be back on target: to clear the deficit and go to the election offering tax cuts. But an interesting effect will be on the Labour Party. If Labour falls behind the Tories in the opinion polls – it is currently only three points ahead on average, with the polls having been stable for the whole year – then Ed Miliband's position becomes precarious. At that point, only two things hold him in place: "there's no one else" and "Labour doesn't get rid of its leaders" (or "it's very hard under the rules to get rid of a Labour leader", which is a variant of the same thing).

Well, there has always been his brother, although I had assumed that he would not want to try again. But last week he made a short speech in the House, which took apart the Autumn Statement with such clarity and style that Labour MPs almost audibly groaned at the implied contrasts with both the leader and Shadow Chancellor.

His cautious readiness to be considered may not be enough to persuade the party to switch, but there is another candidate. Yvette Cooper, the shadow home secretary, could have won the leadership last year had she not decided that her husband should run. She felt it was the wrong time for her, but her top place in the Shadow Cabinet election – a popularity contest among Labour MPs that has now been abolished – suggested that she could have taken Ed Miliband's anti-Blairite vote and added to it.

Since then, she has done no wrong. I don't say she has done well, but she has not made any big mistakes. One Labour MP, who would support her, said: "She'll have to change her voice for the Chamber, like Thatcher did," but thought that she would beat David Miliband in any contest. Ed Balls has said that it is her turn.

As for Labour not getting rid of its leaders, that used to be true. But the MPs did not vote for the leader, and they know that party members didn't either. I think that, this time, they would be unsentimental in disposing of him if they thought anyone else could do better.

Ed Miliband should be praying for the eurozone to go down the tubes.

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