`Second rank Britain' warned by EU

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The Independent Online
TONY BLAIR will today receive a stark warning from Brussels that Britain's exclusion from the single currency is undermining its influence in an array of European Union policy areas and threatens to consign the United Kingdom to Europe's second division.

In a speech in London, Yves-Thibault de Silguy, the European commissioner who was responsible for launching the euro in January, will argue that the Franco-German alliance is gaining ground at Britain's expense. Mr Blair will answer the criticism in a keynote speech in London tomorrow, marking the start of a fightback against the Euroscepticism which helped the Tories win an unexpected victory in last month's Euro elections.

There is growing tension between Mr Blair and Gordon Brown, the Chancellor, over whether Labour should delay the referendum on the euro planned for soon after the next general election. Mr Brown's aides believe that shelving the referendum until 2003 or 2004 would help Labour neutralise the issue at the next election. But Mr Blair is not persuaded, and tomorrow's speech will be seen as a rebuff to supporters of a delay.

Last night, one Blair aide dismissed the calls for a delayed referendum as "wishful thinking by the Eurosceptic press". The aide said: "You have to make the case for Europe in order to make the case for the single currency."

Mr Blair's decision to spell out his plans for "positive engagement" in Europe suggests he is aware that the EU's patience with Britain is running out. In what amounts to a critique of Mr Blair's entire European strategy, Mr de Silguy will argue that a "two-speed" Europe is already a developing - with the UK heading for the second tier.

His speech will alarm pro-Europeans because it goes further than any previous warning from the Commission. Brussels has long argued that Britain's failure to sign up to the euro is costing it influence over the Continent's economic policy. But Mr de Silguy, acting commissioner for monetary affairs, believes that, by staying out of the euro, Britain is losing ground in other spheres of policy, as countries inside the euro zone step up co- ordination across the board.

Although Mr de Silguy will praise the City's contribution to technical preparations for the euro's launch, his language about British policy is expected to be more direct and hard-hitting than ever before. Drafts of the speech argue that "with economic and monetary union [EMU], relations between participating countries have gained new momentum. In the absence of the UK, the traditional Franco-German axis is gaining ground, and not just in economic and monetary affairs.

"This may be good news for those who want more integration within the euro-zone, but it is an important counter-argument for those who oppose EMU membership in order to preserve UK influence."

Mr de Silguy will refer directly to the "danger of a two-speed Europe", demonstrated by the fact that Britain is now outside two important EU bodies, and argue that the "UK should be particularly alarmed" at this development.

Mr Silguy attends regular meetings of the finance ministers of the euro- zone countries - the so-called "Euro-11" - and of the European Central Bank. He will point out today that Britain's economic point of view is represented in neither of these crucial gatherings which are setting a framework which will apply to the UK when it eventually joins the euro.