In a keynote speech the Prime Minister insisted: "Britain should join a successful single currency, provided the economic conditions are met. It is conditional. It is not inevitable. Both intention and conditions are genuine."
Mr Blair told the London Business School that the Government's policy on the euro had not changed.
This was seen as a coded rebuke to aides of Gordon Brown, the Chancellor of the Exchequer, who want to delay a referendum from 2001 to 2003 or 2004. Mr Blair said that Britain remaining engaged with Europe was "not weakness, or the beguiling embrace of European allies; it is stark reality, good old-fashioned British pragmatism that brings us there ... We need therefore to remain engaged at all times; to be building political alliances; to be shaping Europe's development, not continually have it shaped by others."
Following Labour's defeat in last month's Euro-elections, Mr Blair acknowledged that pro-Europeans needed to make the case for full EU participation to a new generation. He attacked the "anti-Europeanism" of the Tories, saying it was "lurching down an extremist path and contemplating a complete withdrawal from Europe". William Hague's policy of ruling out the single currency for this Parliament and the next was "a fatuous piece of fudge".
The Prime Minister pro-mised to lead the Britain In Europe group, the embryo "yes" campaign to be launched in the autumn, and appealed to politicians in all parties to back it.
Mr Blair's speech was welcomed last night by pro-Europeans. In a letter to The Independent a cross-party group of 25 Europhiles, including Sir Edward Heath and Lord Howe, said the speech "paves the way for a historic change in Britain's attitude towards its relations with Europe".
They insisted the views of "an anti-European minority" who wanted to rule out British membership of the euro, and perhaps take Britain out of Europe, was rejected by the vast majority of people.
But Malcolm Bruce, the Liberal Democrats' Treasury spokesman, said the Government's position was "unclear and ambiguous".
Labour's National Executive Committee called for Euro elections to take place on the same day as local elections, and admitted that the "closed list" PR system had alienated the party's activists and voters.