Starting this January, there will be a single monetary policy, with a common interest rate, for the largest integrated economic grouping in the Western world: the euro-zone of some 300 million consumers. Economic and monetary union (Emu) is quite simply the most ambitious European initiative to be launched since the Second World War.
Sitting on the sidelines, from the illusory comfort of self-imposed exile, there is a tendency in Britain to believe that we can simply wait upon events with equanimity, and judge the success or failure of the single currency in our own time and on our own terms. If only it were so.
In reality, Britain's whole relationship to Europe, and with it our place in the world, is about to change. The single-currency euro-zone, five times the size of the British economy and right on our own doorstep, will have subsumed our largest trading market. Outside looking in, we will have to react to an economic order in which others are calling the shots, and from whose key decisions we have chosen to exclude ourselves.
This situation will intensify as Emu widens and deepens: within a decade the euro-zone could comprise 20-plus states. More and more issues will be settled without our voice being heard, on terms we have not helped define. The longer we spend outside, the more difficult we may find it to get in. Another era of agonising reappraisal for Britain - and all too easily one of anguished indecision - is about to begin.
What should we do? First of all, we should wish Emu to succeed, and plan on it doing so. This project is too important for continental leaders to allow it to fail; their commitment to it is enormous and impressive. And second, as a country, we should consciously decide to decide - that is resolve to - sooner rather than later, make a choice for or against membership of the single currency. We should not let the national debate drag on indefinitely, without conclusion.
Most importantly, the Government should, I believe, commit itself to Britain joining Emu, not just in principle, but in practice. Its policy of "if" should become one of "when", and be backed by economic policies designed to maximise the chances of entry. The Government should make serious, practical preparations for Emu membership, so that, if the referendum is positive, we can enter soon after the people choose.
To move ahead on this agenda, Tony Blair and his colleagues have got to start taking some risks. Britain will not join Emu by accident. Sometimes this Government looks like a football team passing the ball around the pitch, in the hope that eventually it will just end up in goal. But at some point, somebody has to shoot for goal.
The best route open to Mr Blair is to set a target date for UK entry, perhaps January 2003, and say that, provided the economics are right, he intends to put the question to the people very soon after the next general election. In preparation for entry, the Government should make it plain that domestic economic policy will be tailored to promoting the necessary degree of cyclical convergence with the euro-zone. In parallel, it should introduce, in this parliament, a "paving" Bill designed to remove legal and other obstacles to membership and use of the euro. As a result, the Government would have established a clear policy; business would have a specific planning horizon, and the electorate would be offered a serious choice.
At the moment, the opposite approach is being pursued. Mr Blair seems to be hoping that political ambiguity will allow him complete freedom in choosing the entry date; that cyclical convergence will happen of its own accord; that business preparations will lead to official ones, and that public opinion will come around to the single currency without the Government risking much political capital on the project. Not so.
The Government has to face the fact that critics will be seeking to highlight every economic problem on the Continent, however minor, as an inherent consequence of Emu. They will manufacture or exaggerate threats far beyond reality - as so recently on tax harmonisation - and create bogeymen with ambitions to subvert a thousand years of our island's history. Countering this onslaught will need to be a major priority for the Treasury and for Number Ten.
Equally however, with every day that passes, the immensity of the new economic reality in Europe can and should become more apparent, and with it the opportunities for Britain of positive participation. The eurosceptic ideology of national isolation will seem increasingly at odds with the new economic and political inter-dependence, generated by market liberalism, which lies at the heart of British success in the world today. This is a battle of ideas which can be won.
If Labour's leaders think they can avoid Emu being a key issue at the next general election, they are mistaken. They must prepare the ground now for a strong, robust defence of their euro-policy in 2001 or 2002. If they decline to answer the important questions when the election comes, then entry in the next parliament will prove difficult.
Worse, equivocation could slip into a temptation effectively to rule out Emu entry in the next parliament in order to close off eurosceptic attack. The game would then be lost. Ministers' panicky responses in October 1997 to self-generated media leaks on the date of Emu entry provide a salutary warning of how things can go wrong when decision-makers lose their strategic compass.
Overall, the greatest risk to UK entry into the single currency lies, not in the constraint of public opinion, but in the absence so far of sustained pro-Emu leadership from the Government. Evasion, inertia or indecision are no substitutes for informing, educating and persuading the electorate about the strong merits of the single-currency case. The introduction of the euro in 11 countries, starting tomorrow, offers a perfect moment to begin that process.
As Kenneth Clarke, Michael Heseltine, myself and others have made clear, pro-European Conservatives will back the Prime Minister in promoting the right policies for Britain - but it is only he and his Government that can give the lead.
The advent of Emu is an opportunity for Mr Blair to demonstrate such leadership. His New Year's resolution should be to act boldly in the national interest. He could well be surprised by the strength of the response.
Lord Howe of Aberavon was Chancellor of the Exchequer 1979-83; Foreign Secretary 1983-89, and Deputy Prime Minister 1989-90Reuse content