Trades Union Congress: Maastricht treaty should be replaced, Gould says: A shadow minister mars John Smith's visit to the TUC, writes Nicholas Timmins

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BRYAN GOULD, Labour's defeated leadership contender, yesterday called for Maastricht to be scrapped and replaced by a new European treaty - reopening Labour divisions on Europe and devaluation.

The treaty, he said, entrenched the most deflationary aspects of the ERM.

A European economy 'wrecked by recession simply cannot afford to hand economic policy over to unelected bankers who will enforce treaty provisions requiring massive cuts in public spending and giving overriding priority to price stability at the expense of jobs and living standards'.

Mr Gould, Labour's heritage spokesman, was repeating the arguments he made in his leadership campaign - but he is now speaking well outside his brief. Even a French 'yes' vote would not save the Maastricht treaty, he said. The Danish 'no' vote would remain in place, but more importantly, popular disillusionment with the treaty was growing.

John Smith's office showed some annoyance, but the Labour leader's view was officially described as 'relaxed' as he told reporters in Blackpool, where he was attending the TUC Congress, that he believed Mr Gould 'was speculating as we are all entitled to do about the effect of the Danish negative response'.

He brushed off suggestions that he should discipline Mr Gould. But the heritage spokesman's view that Britain should 'take the lead in acknowledging that the Maastricht treaty is deeply flawed' and that the problems of Maastricht should be used 'as a launching pad for a new European treaty' contrasts with recent warnings from Jack Cunningham, the party's foreign affairs spokesman, that rejection of the treaty 'would cause major economic problems for us all'.

Labour's official position is that Maastricht should be ratified, but that the party will not vote for it because of the Government's opt-out from the social chapter. But the policy vacuum both Labour and the Government face as Europe waits for the French decision and the Danes to decide their position after their 'no' vote has given Mr Gould room for manoeuvre.

Britain, Mr Gould said, 'should now take the lead in acknowledging that the Maastricht treaty is deeply flawed' and should use its problems 'as the launching pad for a new European treaty which does not condemn us to entrenched deflation and recession'.

A French 'no', he said, 'would at least point the way to what is in any case inevitable - a fundamental reappraisal of Europe's future direction. A 'yes' vote would encourage the illusion that the treaty was back on course and would waste further precious time before eventually the facts are faced'.

Even German support for the treaty could no longer be taken for granted, he said.

'It is the Europe-wide nature of the recession which has brought about the decisive shift in opinion. The people of Europe see the way in which the ERM is operating as a giant engine of deflation and they begin to understand how misconceived is a Maastricht treaty which entrenches the most deflationary features of the ERM.'