The former chancellor also acknowledges that the European constitutional treaty, which he championed, could not be rescued following its rejection in May by the voters of France and the Netherlands.
His comments amount to a remarkable renunciation of deeply held beliefs that have put him at odds with most of an increasingly Eurosceptic Tory party. They are also likely to be seen as an attempt to reach out to Tory MPs as Mr Clarke prepares to launch a third and final attempt to win the party leadership.
In the interview with Central Bank magazine, he said: "I thought it would lead to increased productivity and living standards and stimulate policy reforms. On that front, so far it has been a failure."
He conceded that replacing the pound with the euro would have been a risk for the economy. He said: "I don't think there's ever been a time when the British could have joined with complete security and confidence. I doubt it is possible for 10 years or more."
He also endorses the cautious approach to the merits of the euro adopted by Chancellor Gordon Brown. "If by some unlikely chance I became Chancellor now, I would immediately confirm my predecessor's arrangements," he said.
Mr Clarke said the eurozone was placing severe strains on some parts of the European Union, such as the Mediterranean states.
"I'm beginning to worry considerably about where Italy is going. The Italian government is utterly oblivious of the need to run some reasonable fiscal discipline. It's still running a kind of family capitalism without paying any heed to the level of wages or other costs."
On the proposed EU constitution, Mr Clarke said: "There's no way of rescuing the treaty, although I was in favour. The sooner we can make a reality of economic reforms in terms seen by the public as contributing to their wellbeing, the better."
Mr Clarke looks almost certain to run again after standing unsuccessfully for the Tory leadership in 1997 and 2001. He has previously been hampered by his strong pro-Europeanism, particularly his vociferous support for membership of the single currency.
David Davis, the shadow Home Secretary, remains the clear front-runner in the contest expected in November, but Mr Clarke's supporters argue that his experience and heavy-hitting style make him the potential candidate best placed to reach out to disillusioned former Tories.
His closest rival for challenging Mr Davis is David Cameron, the shadow Education Secretary, and the pair are said to have discussed a "dream ticket".Reuse content