Ministers feud over stance on euro

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Cabinet divisions over the single currency burst into the open again yesterday despite an attempt by Tony Blair to keep the lid on the issue until after the general election.

Cabinet divisions over the single currency burst into the open again yesterday despite an attempt by Tony Blair to keep the lid on the issue until after the general election.

Downing Street launched a damage-limitation exercise after Peter Mandelson, Secretary of State for Northern Ireland, reopened old wounds by saying that pro-Europeans needed to make "the political and constitutional arguments" for British membership.

He was supported by Robin Cook, the Foreign Secretary another strong advocate of joining the euro. But their comments angered allies of Gordon Brown, the Chancellor, who has adopted a more cautious approach and wants to sideline the issue until after the election.

Mr Brown's friends were dismayed that Mr Mandelson appeared to call for the case for the euro to be made on political grounds. One said: "You can't get the politics right until you get the economics right. That is the mistake the Tories made when they took us into the exchange rate mechanism."

The Chancellor reiterated his unbending line yesterday when he said: "The Government's policy remains that it will only recommend joining a successful single currency if it is our national economic interest to do so, and if the economic case is clear and unambiguous."

Responding to a report from the Commons Treasury Select Committee, Mr Brown made clear that he intended to be in the driving seat when the Cabinet considers the issue. "The Treasury will make another assessment of the five economic tests early in the next Parliament," he said.

Downing Street tried to square the circle by saying that the Government had always accepted there were political and constitutional arguments to be made for the euro as well as economic ones. "Clearly if the Government is going at some stage in the future to have a referendum, we have to win all the arguments," said Mr Blair's spokesman. He insisted Mr Mandelson had said nothing that contradicted the Government's policy.

Ironically, Mr Mandelson had intended his remarks - to a meeting of businessmen, staged by the Britain in Europe group - to move towards the position of Mr Brown, with whom he has been involved in a feud since he backed Mr Blair for the Labour leadership in 1994.

Mr Mandelson, who had previously wanted a more vigorous effort to spell out the potential benefits of joining the single currency, told The Independent last month that the pro-euro campaign would have to be put on hold until after the election - Mr Brown's long-standing view. This strategy was reflected in a keynote foreign affairs speech by Mr Blair on Monday, which barely mentioned the euro and instead made a strong case for Britain's membership of the EU.

Mr Mandelson insisted last night: "I do not believe that there is any point in expending campaign capital on the issue of the single currency before the proposition is ready to be put. It is desirable for us to set out the political and economic case for Europe... but the next election will not be fought on the the single currency, so I think everyone should relax on the issue."

But the reaction to Mr Mandelson's speech suggested that Labour will find it difficult to avoid the subject in the run-up to the election. Mr Cook, interviewed on BBC Radio 4, was pressed repeatedly about Mr Mandelson's remarks. The Foreign Secretary said: "It would undoubtedly be helpful for Britain to be fully engaged in the euro as well [as Europe] ... but that does not mean to say that we have to be."

Last night in a speech in Sheffield, Mr Cook said that a strong Europe would mean a strong Britain. "Europe is not Them. Europe is Us," he said. "We achieve more for Britain by playing a leading role than by standing on the sidelines."

Mr Cook was preparing the ground for an extension of qualified majority voting in limited areas when EU leaders agree a new governing treaty in Nice next month. Last night Mr Blair urged Lionel Jospin, the French Prime Minister and Gerhard Schröder, the German Chancellor, to drop proposals to end the veto on tax policy.

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