Challenged by the Labour leader at Commons Question Time, the Prime Minister said he backed the view of his Chancellor, that the Government was "not hostile in its attitude to a single currency - the position remains that we have an open option".
The double U-turn - in which the Government turned full-circle to the precarious balance hammered out between cabinet factions last month - began to emerge after a meeting between Mr Clarke and Malcolm Rifkind, the Foreign Secretary, in the early hours of yesterday.
In a statement issued to the Reuters news agency, the two men announced: "We are hostile to the notion that a single currency can proceed at any stage on a non-convergent basis."
That complex formula was the only way in which the two men could square the circle of Mr Rifkind's Wednesday statement, that the Government was on balance "hostile to a single currency", and the cabinet agreement of 23 January.
The Cabinet had then agreed that it was "very unlikely but not impossible" that the single currency could proceed, with or without sterling participation, at the start of 1999.
But it became clear yesterday morning that if Mr Rifkind's "slip of the tongue" - the Chancellor's generous description - had been allowed to remain, the splits in the Tory ranks would have threatened to break the party.
Speaking on a BBC television broadcast the deputy prime minister Michael Heseltine said last night that Mr Rifkind had not changed the agreed Cabinet line when he said the Conservatives were hostile to a single currency. "It's clear he was saying we are hostile in the Conservative Party to a botched economic and monetary union. We would not go ahead if the economic conditions were such that it was likely to fail.
In a BBC radio Today interview, Lord Howe warned that he would find it hard to back a government "that is in principle hostile to the concept of a single currency". The man who triggered the downfall of Margaret Thatcher in 1990 went on: "One's enthusiasm is bound to diminish if one is confronted with a series of steps constantly being taken in the wrong direction."
The implicit threat was that Lord Howe - and other Tory grandees, who sounded a similar warning in The Independent last year - could cause every bit as much trouble for Mr Major as the Euro-sceptics.
But the movement was not all one-sided. Gordon Brown, the shadow Chancellor, said after a Washington meeting with US Treasury Secretary Robert Rubin: "There are real obstacles facing Britain and other countries which are increasingly difficult to overcome by 1999." But he went on: "If conditions are right, we will retain the option of joining the single currency in the next Parliament."
Donald Macintyre, page 17
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