Prodi tells Britain to join euro or it will 'lag behind'

The President of the European Commission yesterday issued a stark warning that Britain will be left "lagging behind" unless it joins the euro and backs sweeping EU reforms including the end of the national veto in key policy decisions.

The President of the European Commission yesterday issued a stark warning that Britain will be left "lagging behind" unless it joins the euro and backs sweeping EU reforms including the end of the national veto in key policy decisions.

Romano Prodi provoked an angry response from the Government after he urged Britain to back majority voting on controversial issues relating to tax and immigration.

Mr Prodi told the Confederation of British Industry conference: "Europe wants the UK to play its rightful role in the union, a leading role. But the choice is yours - a leading role or a country left lagging behind."

Interviewed later, he went further. "If Britain stays out of the euro, does not participate in so-called enhanced co-operation in Europe, Britain loses its strength in the Union," he said. "Not to participate is a big and important issue that has real consequences."

British ministers reacted coolly to Mr Prodi's remarks, saying he was voicing his frustration at the lack of progress towards agreeing on a new EU treaty at a summit of EU leaders in Nice this month.

Downing Street insisted last night that Britain was not in the slow lane because Tony Blair had adopted a positive stance on Europe. "This has led to us having more influence over EU decision-making and has increased Britain's standing in Europe considerably," said a spokesman. Britain was leading the debate on economic reform and defence co-operation.

Mr Prodi's comments, which came as the European Central Bank intervened again on money markets in an effort to shore up the ailing currency, drew an angry response from Keith Vaz, the Minister for Europe. "We have made it very clear that our bottom line on tax, social security and immigration is that we won't consider qualified majority voting or the removal of the veto," he said. "Mr Prodi has put his view forward but tax is completely out."

Mr Prodi listed six issues on which he wants to scrap the national veto: certain areas of tax policy, some immigration regulations, decisions on EU structural funds, combating fraud, e-commerce and trade in services. But he insisted the EU's proposals did not apply to income tax.

"I am confident that the UK government will help to deliver an agreement in December on this most important issue in spite of the scare stories about the creation of a centralised superstate," Mr Prodi said. He pointed out that a number of measures that Britain supports had only been achieved through majority voting.

"I do want Europe to become a super power. In this you will see that I agree entirely with Tony Blair," he said.

But in another development, the European Commission contradicted the British interpretation of plans to allow groups of member states to forge closer integration, creating a multi-speed Europe. At present any country can prevent the others doing so by using an "emergency brake" mechanism. Latest proposals would scrap this right but allow any country to appeal to the European Council.

Christine Roger, the aide to the European Commissioner responsible for the treaty change, Michel Barnier, said this leaves "no possibility of blocking" closer co-operation in most areas. The Government concedes that the formulation is vague but argues that a decision would still have to be reached by consensus.