THE SINGLE CURRENCY DEBATE : Major has the social chapter in his sights

Europe divided: Conservative leaders go on the offensive, arguing against greater integration and the social chapter

John Major will risk causing new divisions with Britain's European partners today by using a visit to Brussels to launch a pre-election attack on the social chapter.

The Prime Minister will attack Labour's proposal to end Britain's opt- out from the chapter at a European Policy Forum business conference. Mr Major will warn that the social chapter is anti- competitive, and deregulated Britain is a magnet for inward investment.

The speech may play well at home, but it is unlikely to impress other European leaders. Alain Juppe, the French prime minister, said after his meeting with Mr Major in London yesterday that the social chapter was not an obstacle to job creation in France .

"I think there is no relation or no link between those elements ... our main objective to create jobs in France is to consolidate our budget and financial situation," Mr Juppe said.

After the meeting, the Tories' election campaign took a Euro-sceptic turn with the launch of a poster proclaiming: "New Labour. Euro Danger".

Tory sources said the poster attacked Labour rather than Europe, and that it was meant to highlight the party's plan to sign up to the social chapter.

However, coming immediately after comments by Labour's foreign-affairs spokesman, Robin Cook, that Britain could join the single currency by 2002, it struck a rather different note.

The poster, which features a lion with a red tear-drop, was unveiled by the party chairman, Brian Mawhinney, and the Deputy Prime Minister, Michael Heseltine. It claims that the social chapter could cost hundreds of thousands of jobs and could put Britain's prosperity at risk.

Mr Heseltine said Labour would introduce a minimum wage and trade-union reforms which would undermine the country's competitiveness. The party was also fudging the issue of the single currency, he claimed, and Mr Cook was trying to avoid difficult election issues by "kicking the whole thing into the next century".

Mr Major believes the Conservatives should promote themselves as the party that stands up for Britain's interests in Europe, party sources say. They add that the poster initiative has the backing of the entire Cabinet, including the pro-European Chancellor, Kenneth Clarke.

"We are the party that you can rely on to negotiate and decide in Britain's best interest about the European single currency. The issues are about this election and whether we're going to fight for Britain in this election campaign," Mr Heseltine said.

But Mr Cook said yesterday that Europe should be an association of free states, coming together not to surrender sovereignty but to co-operate in the common interest.

While there were "formidable problems about joining a single currency", Britain would face long-term penalties if it stayed out, he said.

"It would be very interesting to know if Conservative politicians are prepared to say that `yes if it goes ahead, yes if it proves a success, if the single currency is strong, we'll still stay out on a matter of principle'."