Donald Macintyre: When it comes to Europe, there is still a lot to play for

'Mr Blair is still keen, determined even, to take Britain into the euro in this Parliament if he can'
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The Independent Online

Throughout the first term of this Government, its relative caution and almost studiedly unspectacular progress was routinely excused by the need to win a second term. Labour had never done it before, we were told; it could not afford to blow its historic opportunity to show it was a natural party of government, as it had so sadly failed to do in 1951, in 1970 and in 1979. Caution, micro-management of the media, populism, and risk aversion were all necessary components of arriving on the sun-splashed shores of a second term, when we would really see what Mr Blair's government was made of.

Then came polling night, and a victory on a scale that even the party's most fantastic optimists did not dare dream of. And then what? Well nothing very apparent, a few new faces around the Cabinet table, a somewhat impenetrable reorganisation of Downing Street and its satellite offices, a bold start by David Blunkett at the Home Office if not by many other departments, and otherwise a rather deadening sense of continuity. Where was the excitement? Where was the sense of release?

Despite this media sense of let-down – which is somewhat distinct from the chagrin of Labour backbenchers who gave Mr Blair an unmistakeable and equally understandable going over in the Commons on specific policies yesterday – I confess to a certain sneaking and unfashionable sympathy for the Government on at least one point. For when it comes to making a splash, it appears that the Government is damned if it does and damned if it doesn't. You can't really complain that Mr Blair chooses to govern by headline in the first term and turn round and attack him for not doing so in the second. You can't really moan about spin, and then lament that there isn't enough of it. You can't really attack the Government for being a soap opera and then feel cheated when it isn't one.

That said, nowhere was the sense of disappointment greater or more rational than among that powerful group of businessmen (and for that matter trade union leaders) who favour entry into the single currency. After all, not only had the government won very big indeed, but it had done so against an Opposition explicitly describing the election as a referendum on the euro. The forces of opposition to British single currency had been humiliated. If this was not a mandate for a victorious party committed in principle to entry, what was?

Yet what was the response? A period of eerie silence followed by an important Mansion House speech by the Chancellor which was widely interpreted as signifying a protracted delay for British euro-entry, and on which the Prime Minister, the Foreign Secretary, Jack Straw, and the Minister for Europe, Peter Hain – the first politician of real substance to be sent to that important job since 1997 – were all closely consulted. This was reinforced by accurate reports that Cabinet ministers and their underlings had been barred from speaking out on the subject. For those businessmen and their allies it began to look as if either Tony Blair had lost any appetite for British membership of EMU, or as if he hadn't but was no longer in charge of the policy.

After a decent interval, it's time to take stock. For there are quiet but unmistakeable messages from the centre of government that this interpretation is wide of the mark. Mr Blair, it's reliably said, is still keen, determined even, to take Britain into the euro in this Parliament, provided the circumstances are right. True, these include a variable about which confident predictions can't be made, namely the need for the euro to rise at last against the dollar. But as important, it's claimed, he believes he has reason to count on the pivotal support of the Chancellor in that event.

Whether he is right to do so, we can't perhaps be sure. The speech yesterday by the TGWU leader, Bill Morris, in which he mentioned the need for EU economic and political reform and greater accountability for the European Central Bank to go hand-in-hand with a decision on entry, sounded very close to some of the objections to early entry canvassed by others in the Chancellor's circle. And it is certainly true that the Mansion House speech's cautious approach was partly designed to reverse a fall in sterling which had followed speculation about a pro-euro campaign in the autumn. Nevertheless a reading of Mr Brown's text, as distinct from some of the spin which attended it, suggests a much more subtle picture than the one the businessmen are worrying about.

According to one wholly counter-intuitive account, the original Brown draft was even more friendly to euro entry than the text he delivered. As it is, however, Mr Brown's depiction of his own "pro-euro realism" was laced with several elements not present in other speeches he has made – including during the election campaign and in the previous year's speech at Mansion House. He reasserted Labour's support in principle for the euro, and some of the reasons for it. And far from explicitly putting off a decision until at least 2003, he accepted that the economic assessment would be completed in two years.

This doesn't mean that the pro-euro businessmen, whom Mr Blair will no doubt seek to reassure in the coming weeks, will be easily convinced. They have heard this message, or something like it, before. But the idea – now freely accepted in the Tory party, in the Eurosceptic press and in much of the City – that Mr Blair has all but ruled out entry in the current Parliament, appears to be the reverse of the truth.

The difficulties should not be underestimated. Mr Blair is said to be wary of anything but the most limited exercise in "managing down" the sterling rate to hasten euro entry, not least because of the inflationary consequences. And yet the sotto voce signals of continued interest in EMU entry will have to be underpinned at some point by a public campaign, which almost certainly will need to start this autumn. Both the Chancellor and the Prime Minister will have at the very least to make the case for full engagement in Europe that in the long run only EMU membership can guarantee. A decision to join will require him to overcome some of his reverence for Mr Philip Gould's focus groups, remembering perhaps that focus groups are notoriously against radical change of any kind. And so on. Above all, it will need a collective will by ministers, weary with the life and death struggle to save the public services, to gird themselves for a campaign that they do not believe they were primarily elected for.

The difficulties should not be overestimated. Poll evidence of quite widespread uncertainty and self-confessed ignorance about EMU among the voting public – coupled with a hardening belief that it will happen – reinforce the anecdotal impressions of the election campaign, that even some of those who say they are strongly opposed tend to lament the fact that the case for entry has not yet been made. The idea that a joint campaign by Tony Blair, Gordon Brown and, say, Ken Clarke has no hope of reversing admittedly widespread scepticism is surely defeatist. It will need Mr Blair to return from his summer holidays imbued with a sense of purpose about locating, once and for all, Britain's destiny in Europe. But don't bet too much against that happening. There is still a great deal to play for.