Peter Mandelson risks losing the chance of a top new job in Europe because his appointment would be seen as a slight against the Chancellor, Gordon Brown, according to ministers.
The former Cabinet minister is on a Downing Street shortlist with David Miliband, the former head of the No 10 policy unit, for a seat on the Convention, a body created to reform the voting structure of the enlarged EU, to be chaired by Valery Giscard d'Estaing.
"Downing Street won't appoint Peter because it will be seen as a move against Gordon, which is a pity because he's so talented," said one minister involved.
"They want Miliband but he's reluctant. They don't want someone high profile. They want someone to get on with the job," he added.
Mr Mandelson underlined his pro-European commitment last week and has tried to build bridges with the Chancellor, but there are said to be fears at No 10 that the UK media would make mischief with the appointment.
Mr Miliband remains the favourite. Others on the shortlist include constitutional expert Graham Allen and Joyce Quin, a former Minister for Europe.
Meanwhile, the present Minister for Europe, Peter Hain, will today accuse the media of "befuddling the debate" over the Government's "prepare and decide" policy on the euro.
He is furious at media coverage of his remarks on the launch of the euro. He denies saying that Britain's membership of the single currency would be "inevitable".
Mr Hain will use a GMTV interview this morning to deny reports that he was reprimanded by the Foreign Secretary, Jack Straw, for overstepping the line.
Mr Hain said: "I think there is a really serious problem in the way a lot of the print media are covering the euro. As somebody who always tries to be open and answer the questions, I am almost inclined to start reciting the Chancellor's five tests for a euro referendum when anybody starts asking me anything about the euro.
"We have got to have an intelligent debate. We cannot have the spinning operation by the print media which just completely befuddles the whole debate."
His frustration is shared by the Government's chief spin-doctor, Alastair Campbell, the head of strategy at Downing Street. It could lead to attempts by the Government to overcome the "spinning" by employing more high-profile information campaigns paid for by the taxpayer.
However, that could outrage the anti-euro campaigners who have criticised the Government for using taxpayers' money for "propaganda" on the currency. The Foreign Office was forced to deny reports on Friday that it was sounding out advertising agencies for a euro campaign.
Mr Hain's outburst came at the end of a week in which Mr Blair led the charge by stating that the success of the euro was vital to Britain's interests. He followed that up by saying at the start of his Asia trip that Britain could not "hide" from the euro.
In spite of Mr Hain's denials about the inevitability of joining, there are strong signals that the Government is preparing the ground for entry. Sources close to No 10 have disclosed that their preferred timetable is for an assessment to be made in the autumn this year, with a referendum in spring 2003.
But the Treasury yesterday reasserted its authority over euro policy. A spokesman for Mr Brown said: "The economic case must be clear and unambiguous. That is why the assessment of the five economic tests will be comprehensive and rigorous."
Simon Murphy, the leader of Labour's MEPs, said the Treasury assessment "may be going on now", and called for early entry to the single currency.Reuse content