Tony Blair has told Gordon Brown that he cannot rule out a referendum on the euro before the next general election.
Allies of the Prime Minister claim he has gone a long way towards enforcing the road map to British membership of the single currency demanded by its supporters.
One former senior adviser said: "The signs are that there is a reasonable prospect that if the economic conditions are right, there will be a referendum next year. The Prime Minister seems to have taken control of the process. I cannot see the point of going through this long process of pitting his wits against the brightest boy in the school and continually calling him into the headmaster's study, unless he believes there is a prospect of doing it next year."
The same optimism was echoed by the pro-euro Labour MP Chris Bryant. He said: "All the messages I have been getting from Downing Street and the whips' office and from people who know is there will be no ruling in or ruling out of a referendum before the next election."
Optimistic forecasts from inside the pro-euro camp contrast with the comments of Peter Mandelson, the former Cabinet minister, who told journalists last week that Mr Blair had been outmanoeuvred by an "obsessed" Chancellor.
Another former Cabinet minister has privately warned that while most Cabinet members support the Prime Minister's pro-euro views, the "big players" - the Deputy Prime Minister, John Prescott, the Foreign Secretary, Jack Straw, and the Home Secretary, David Blunkett - are lining up on the same side as the Chancellor.
The Prime Minister and Chancellor have yet to agree over another of the demands put by the pro-euro camp, for an announcement in the Queen's Speech in the autumn that the Government will pass the legislation that would enable it to call a referendum at short notice.
Allies of Mr Brown have argued that a so-called "paving Bill" is unnecessary because legislation can be put through Parliament quickly once the economic conditions for euro membership have been met. But those who support British membership see the Bill as a symbolic gesture to show that the Government is serious about joining.
They warn that otherwise Tony Blair will look as if he is taking the same half-hearted "wait and see" line as John Major, whose premiership was wrecked by arguments over the euro.