Major celebrates the turning point: Prime Minister says UK is winning the arguments in Europe as Maastricht debate draws to a close

JOHN MAJOR emerged last night from the economic and political battlefields of recession and Maastricht legislation, declaring that recovery had begun and the British were winning the arguments in Europe.

With unemployment falling for a second successive month, the final day of the hard-fought Commons committee stage on Maastricht drawing to a close, and county council elections and the Newbury by-election just a fortnight away, Mr Major told ITN: 'We are beginning now to see the recovery.'

And he said in a BBC television interview: 'Things are certainly getting quite sharply better.'

However, the Prime Minister's optimism was tinged with caution on the need for growth in the manufacturing base - which he returns to in a speech this weekend - and action on a balance of payments deficit that had prompted earlier warnings from John Smith and Paddy Ashdown.

In the Commons, the Labour leader said the continuing high level of unemployment was partly a reflection of persistent underinvestment in manufacturing and skills training, and a dangerously high balance of payments deficit.

Mr Ashdown, the Liberal Democrats' leader, told a Westminster press conference that substantial recovery, together with the 'terrifying trade deficit', could create a resurgence of inflation and a return to the boom-bust economic cycle.

Although the Prime Minister roused his side of the House with a denunciation of Mr Smith's warning as so much 'whinge', he later told the BBC that the Government did need to address the balance of payments question, and that unemployment was indeed still too high.

'What we are seeking to do is to ensure that we have a sustainable base for lasting recovery and a growing manufacturing base as well,' he said. 'That is why two years ago we set as the essential necessity for the future, low and stable inflation. When we have achieved that, we said that recovery would begin. It looks as though we have.' On Europe, Mr Major told Channel Four News that Commons rows over Maastricht had created a negative and damaging impression in the public mind.

In an effort to counteract that, he said in a later speech that the importance of Brussels centralisers was diminishing, and attacked Westminster defeatists who tried to make people's flesh creep with fears that Britain would always lose EC arguments.

Addressing the Conservative Group for Europe at a London meeting, Mr Major said: 'The Single Market was a British idea; breaking open state monopolies was a British idea; CAP reform, and enlargement have been British goals.'

He told ITN that the Government had won all those battles, and asked: 'Why should people always be so fearful that Britain will lose the important arguments in Europe? History shows that we don't. We're the British. We should be a good deal more confident . . . .

'Push aside many of the artificial fears and worries and concerns, many of which have nothing to do with the Maastricht treaty, and a good deal to do with other frustrations that people have about Europe.'

Those frustrations, he said in his speech, related to a sharing of sovereignty with what his opponents classed as 'ruddy foreigners'. Mr Major said that his critics were 'clanking' around in suits of armour while trying to impose a 'despotism of nostalgia' on the country.

However, Mr Ashdown said the 26-strong rebel rump of MPs in the Tory ranks had made so much trouble for Mr Major over Maastricht that they could not be dismissed so lightly; they now formed a minority party in their own right.

'We have seen a minority Government in action; a hung Parliament in action' - and he added that the Liberal Democrats had provided the majority to get the Bill through.

Speech details, page 8

Leading article, page 21

(Photograph omitted)