Europe, the continent of good intent and late-night compromises?

The Way Forward document of Blair and Schroder is brave stuff, but also contradictory

IN A late burst of fervour for the Euro-elections, the Government is telling us not to miss tomorrow's golden opportunity to vote against the wearing of anoraks and baseball caps. You may have thought that European elections were something to do with the EU, or a chance to voice a view on the single currency. But no. The half-silken, half-threatening tones of Jeremy Irons offered the nation a stark choice in last night's party political broadcast. "Do you want Tony Blair, or do you want this man?" he intoned, over the frightsome image of Mr Hague captured in a state of unflattering glee in a theme park.

"A cheap trick," rails Conservative Central Office, which translates as: "How could we let him go out looking like such a plonker?" In his office, Alastair Campbell has a copy of the offending headgear on his desk, like a talisman intended to ward off evil - or rather, ward on to the Tories. Once again, Labour is hitting the Conservatives where it hurts: in the leadership. Just as the Tories identified the person of Neil Kinnock as the key weakness of the party in the 1992 elections, so New Labour has got hold of "Hague the loser/ Blair the winner" as the central paradigm of British politics, and has no intention of letting go of it.

The Conservatives, having set out to fight an intelligent campaign based on the clear gap in intention towards the single currency, are abasing their own message with a lot of dumbed-down nonsense about Mr Blair being "two-faced" because he eats fettuccine when in Islington and fish and chips when in the North-east. Hailing from a village close to Mr Blair's adopted home of Trimdon, and resident in the borough of Islington, I have to tell them that it is not just Tony who is so duplicitous. We don't have many deliveries of fresh fettuccine in County Durham, but we do have a lot of chippies. In Islington, it's the other way round. C'est la vie.

It is at moments like this - a sort of crass appeal to the kind of people who they think disapprove of pasta, presumably because it is foreign muck - that one despairs of the Tories' instincts. Meanwhile, the Government is running an advertising campaign that has absolutely nothing to do with the Euro-elections at all, and certainly nothing to do with the euro. The latest ICM poll shows a record 61 per cent opposed to joining EMU, a reflection not only of the currency's failure to inspire confidence in its future, but also of the dogged resistance of voters to the softly- softly attempts by the Government to lead us towards membership.

Against this background, the publication yesterday of the Anglo-German document, The Way Forward for Europe's Social Democrats, marks an attempt by Tony Blair and Germany's Chancellor Schroder to establish themselves as an alliance for EU reform. It is the result of a series of consultations between Peter Mandelson and Herr Schroder's modernising aide, Bodo Hombach, both of whom are on the economic right of the centre left. So the document is heavy on recommendations for creating more flexible labour markets and cutting labour costs - punitively high in Germany - and on promoting individual responsibility. Rights come with their responsibilities dutifully in tow, and entrepreneurship is lauded, together with a "go-ahead mentality".

This will not please those who view the European Union as offering alternative means to socialist ends. As a road map for the centre left, it is encouraging. No punches are pulled on the foolishness of mistaking high public spending for improving lives. The canard that promoting social justice means promoting equality of outcome is shot and stuffed. The causes of much European unemployment are candidly acknowledged to be structural, rather than cyclical. Brave stuff.

Then comes the crunch. "The EU should continue to act as a resolute force for the liberalisation of world trade," it says. Pull the other one. Can they mean the same European Union that is embroiled in a damaging trade war with America about bananas, the result of a short-sighted deal done to oblige the former colonies of some member states, or that is upholding a ban on US hormone-enhanced beef, a matter that free-traders would say the consumer, not the Commission, should decide?

Here is the contradiction at the heart of the Mandelson-Hombach document: indeed, at the heart of reformist centre-left thinking about the EU as a whole. Does the vigour enshrined in the Blair-Schroder joint statement extend to taking on entrenched interests in the EU, or will the good intentions be traded away in some late-night compromise? At one point, the document swerves into disingenuous EU-speak: "Tax policy should combat unfair competition and fight tax evasion." This really is a naughty, Jesuitical attempt to place tax-harmonisation and tax evasion in the same bracket. Evading tax is an activity that the vast majority of us agree should be strongly discouraged, whereas "unfair competition" is very much in the eye of the beholder, as the row over attempts to impose the withholding tax on the profits of the City of London demonstrates. I am amazed that a call for tax-harmonisation should have survived the departure of the left-wing finance minister, Oskar Lafontaine.

The significance of The Way Forward is very different for the two leaders. For Mr Blair, it enshrines what he is already doing rather successfully. For Herr Schroder, it enshrines what he still has to do. Germany is predicting a growth of only 1.5 per cent this year, putting it on a par with Italy as the most sluggish performer inside the eurozone. It has also failed to tackle unemployment - the key issue on which he was elected. Even after the departure of Mr Lafontaine, German business remains sceptical about the competence of the coalition government.

If Mr Blair is unable to sell to the voters the proposition that his influence can significantly reform European institutions, the worst that can happen is that he has to stand outside the single currency during his next term in office. If Herr Schroder cannot convince Germany that his "Politics of the New Centre" are more than a well-meaning bundle of good intentions that will never get implemented, then he will be voted out of office.

But the economic woes of Europe's economic giant are deeply rooted and not, as too many German politicians have airily assumed, merely the product of having to absorb the former East Germany. Reforms to combat structural unemployment will be painful. Think back to the peak of British unemployment in the mid-Eighties, its divisive impact on affected communities, and the feeling of national unhappiness. Mr Schroder has the misfortune of not having the brutal but effective legacy of a Frau Thatcher on which to build. He must shoulder the burdens of change alone. Unlike Mr Blair, he does not have the gift of time on his side.