Labour out of step with European allies

ll the gossip around Westminster suggests that Labour is on the verge of ruling out British membership of the single European currency for the next parliament. On the principle that in politics there is usually no smoke without at least smouldering, it is worth taking the rumours seriously, if only as indicating the wishful thinking of the Eurosceptics in Labour's upper reaches. Who knows? By the time you read this it could be policy.

First, though, the evidence of impending change, if you can call it that. The most important thing that has emerged in the past few weeks is the strength of hostility to the euro in the Treasury. It's not that Gordon Brown has declared publicly against joining the euro - but then his style has never been to say what he means. Rather, it is that, thanks to new books by Andrew Rawnsley and Geoffrey Robinson, more details have emerged of the famous row in autumn 1997 that followed the revelation by Brown's spin-doctor, Charlie Whelan, that the Chancellor was going to rule out participation in the euro for the duration of this parliament. Precisely who said what to whom and who behaved like a complete shit can be left to the squabbling principals and their interlocutors. What is important is that Brown won the argument against stiff opposition from the pro-euro camp (or, more accurately, those who thought the issue should be kept open), led by Peter Mandelson. Meanwhile, a long-brewing crisis in Britain in Europe has come to a head.

BiE was originally set up by the European Movement and others as a nominally cross-party outfit, backed by business and pro-European unions, to campaign for joining the euro. But it has consistently done the bidding of new Labour: even before its launch last year it was persuaded by Tony Blair to tone down its message so as to become a champion merely of British membership of the European Union. Last month, BiE's high-ups announced a de facto suspension of activities until after the next election - to the consternation of ordinary supporters but with the backing of Peter Mandelson (funny how the same names keep cropping up).

Almost simultaneously, Tony Blair announced that he would vote no to euro membership if a referendum were held right now - and with that, the newspapers filled up with mysteriously sourced speculation that, because Philip Gould's focus groups were so unsympathetic, Brown was adamant that euro membership was not on and Alastair Campbell, John Prescott and other supported him, Blair had been persuaded to match the Tories' promise of staying out of the single currency until the election after next.

What is clear, however, is that, even if Labour does not rule out euro membership for the next parliament, it will almost certainly make little effort to persuade the sceptical British public of the case for the single currency between now and the election - which makes a referendum on the euro early in the next parliament somewhat unlikely. And this in turn makes it more likely that the referendum won't take place at all before the election after next, regardless of what is in the Labour manifesto.

Whatever transpires, it is hardly surprising that other EU governments are becoming increasingly dismissive of Labour's protestations that it wants to play a constructive role at the heart of Europe - and their mood has not been improved by Blair's much-hyped speech in Warsaw last month on institutional reform of the EU to cope with enlargement.

Billed as the British contribution to the great debate inaugurated in the spring by German foreign minister Joschka Fischer and French president Jacques Chirac, Blair's speech made some important points about the EU's urgent need for greater transparency and democratic accountability. But his proposed solutions leave a lot to be desired.

Blair put forward three key reforms: a greater role for the Council of Ministers; a reduced role for the European Commission; and a second chamber for the European Parliament drawn from the membership of national parliaments to keep the existing directly elected chamber in check. In essence, his argument is that the supranational institutions of the EU should yield power and influence to intergovernmental institutions, on the grounds that national governments enjoy popular legitimacy that the supranational European institutions do not.

The problems here are twofold. Firstly, at the centre of Blair's proposals is a misidentification of the locus of the EU's democratic deficit, which is not in the lack of popular support for the Parliament but in the lack of accountability to the Parliament of the Commission and, especially, in the secretiveness and horse-trading that characterises the intergovernmental Council of Ministers - the very institution that Blair sees as the EU's saviour. Only an increase in the powers of the Parliament could really address this problem - yet this was explicitly ruled out by Blair.

Secondly, although Blair's intergovernmentalism is viewed sympathetically by the French, it is anathema to the Germans and nearly everyone else - while his downplaying of the role of the Commission is anathema to the French. So his vision is not merely wrong in principle but poor Realpolitik that is unlikely to have any impact on events.

It is difficult to avoid the conclusion that Labour's European policy is a shambles - but then it was always likely to become one from the point at which the party's leaders decided to opt for a referendum on the euro in the run-up to the 1997 election. At the time nearly every pundit saw it as a political masterstroke. But ever since it was decided not to hold it at the height of the new government's popularity in 1997 it has loomed ever-larger as a giant hostage to fortune. The only way out would seem to be a massive campaign arguing the benefits of the European social model against the Wild West capitalism of the United States. But the chances of Blair presiding over any such thing seem slim indeed.