On a day Europe came 20 minutes closer by rail, joining the euro still seems years away

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So near and yet so far. Amid some fanfare, Tony Blair went to Waterloo station in London yesterday to open the first, 46-mile section of the British Channel Tunnel Rail Link and declared that its completion should give the country "optimism" and "some spur" to the future renewal of Britain's rail infrastructure.

As a wider symbol of closer integration with Europe, it looks, on the face of it, forlorn. For yesterday's ceremony came at a moment when hopes of advancing Britain's European destiny - so high when Mr Blair came into office six years ago - appear to have stalled. The 56-42 per cent "no" vote in Sunday's Swedish euro referendum is only the latest blow to dwindling expectations that Mr Blair may soon be prepared to go where the Swedish premier, Goran Persson, and his murdered Foreign Minister, Anna Lindh, did not, despite all the political risks now laid bare, fear to tread.

It is easy to depict the Government, led by a Prime Minister who has seen his personal trust steadily undermined by the raging debate over Iraq, and who is at odds with much of Western Europe over that very issue, as further than ever from his goal of leadership in the EU, not to mention incapable of winning a euro referendum in the foreseeable future.

And yet anyone who has seen Mr Blair recently knows very well that he has not swerved a millimetre from his conviction that Britain's rightful place lies at the heart of Europe and the eurozone; and that his historic duty is still to locate it there if he can. This weekend's meeting between the European big three could just start to heal the still bitter divisions between them over Iraq. But the big question, given a Chancellor still deeply sceptical about the wisdom of an early referendum, the daily onslaughts on Mr Blair's own personal credibility, and now the decisive rejection of closer integration demonstrated by electors in just the kind of modern social democratic European country Blairite Britain aspires to be, is how the Prime Minister can possibly still put that conviction into practice. No sentient cabinet minister, however pro-Euro and however pro-Blair, now thinks there will be a referendum in this Parliament. But if not now, when?

Hugely more difficult as these questions have become, they may not necessarily be without answers. The first imperative concerns the future constitution of the EU. The Government has a choice. It can mount an essentially defensive operation, pretending - preposterously - that the new draft constitution is no more than a "tidying up exercise". Or it can go on the offensive, arguing with justice that Giscard D'Estaing's document closely and deliberately reflects British thinking. And that the benefits of a constitution which ensures that what is best done by member states will be left to member states, makes it much easier to progress British goals such as agricultural reform, increases the grip of elected governments on EU decision making and can finally call a halt to the remorseless march to ever-closer union, greatly outweigh the minimal risks. In a robust Commons performance yesterday Jack Straw went at least some way along the latter route.

But if and when that argument is won, the euro will loom, tantalisingly, even larger. Mr Persson told Mr Blair last week that his main problem in securing a "yes" vote was that Swedish electors looked at a still relatively sclerotic German economy and wondered why they should abandon their currency when high Swedish growth compared so favourably with that of the eurozone as a whole.

Mr Blair knows very well that the political and psychological effects of such a disparity would be as influential in a British referendum if it were called today, if not even more so. As it happens, he has an answer to the constant complaints that Britain shouldn't enter the eurozone because its economies are faring worse than they should be. It's one he gave in the most tragically bizarre of circumstances, in a speech in Tokyo the day after David Kelly's death. The written text said that this was "a strange way of casting the national interest; since when did a successful businessman withdraw from a market because he feared that his rivals would not compete?"

Mr Blair also seems to believe that the steady devaluation of the pound since the 2001 election and an emerging economic climate in which cuts in interest rates - of the sort which would still be needed if Britain went in - no longer trigger inflationary growth as they once did, could in the coming few years rapidly reduce the economic divergences that he still believes would have made euro-entry impossible up to now.

Of all this however, as he well knows, he has yet to persuade the country or his Chancellor. He remains determined to ensure that Gordon Brown, in his Budget next year, goes a quantum step further than in his euro-statement on 9 June in making clear that the UK has made decisive changes - for example in housing policy - which would make entry much more feasible. Yet his ability to do that could well depend on how far he is able to restore public trust in himself and reassert his authority - including over his Chancellor - post Hutton and after the Labour Party conference.

For the other lesson of the Swedish referendum is that the process of persuasion has to be much longer than one quick campaign. The past six years have been a terribly wasted opportunity; while stressing correctly that entry is only sensible when the economic conditions are right, ministers from Mr Blair down didn't make the case in principle for entry as they might have done.

Knowing that a great deal could change in a year or two, Mr Blair is one of the few politicians who thinks that it could still just be possible to reverse the effects of this paralysis. But if he cannot prepare the ground, he will see his most cherished project turn to ashes.

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