The European Presidency: Memo to the Iron Chancellor: don't pick fights you can't win

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This may not be the decent moment to do so, but cast your mind back to the last time Britain held the Presidency of the European Union, five long years ago. This morning, Tony Blair ushers in our six-month term with some New Labour fun and games at Waterloo Station - a rousing speech, flashing videos and further national rebranding, all in the presence of dignitaries disgorged from a Eurostar train, symbol of our unbreakable ties with the lands beyond the Channel.

In fact of course we don't start the job until January 1, but custom now dictates that the incoming Presidency rings the celebratory bells a few weeks early. And this time they will have a distinctly sweeter chime. Labour after all has placed itself squarely "at the heart of Europe" and broken the self-defeating cycle of Tory Euro-scepticism.

Or has it? Yes, there are new players, and the mood music has changed almost beyond recognition. But consider, uneasily, a couple of parallels between today and the second half of 1992. Then as now, a modest whiff of Europhilia was abroad in the land. The Maastricht treaty on European union had just been signed and John Major had secured his opt-out from the Social Chapter, supposedly saving Britain from creeping Euro-socialism. The federal beast, it had been proved, could be tamed. Maybe Europe wasn't so bad after all. We all know what happened next.

First Denmark rejected the Maastricht Treaty. Then that psychological setback was dwarfed by the humiliation of Black Wednesday, as the pound crashed out of the ERM. This time of course, there's no risk of watching half the Bank of England's reserves evaporate over the duration of a banker's lunch. But once again trouble is brewing over money - to be precise, the institutional arrangements for the ERM's successor, the single currency.

The Blair prime ministership will certainly not be destroyed by the issue as Major's was by Black Wednesday. But after six months of sweet-talk, the honeymoon with Europe is abruptly over. Gordon Brown is sulking and the Government is sounding, and acting, Old Tory. With one important difference, however. The Conservatives knew they could expect few favours in Brussels. Labour is getting the reverse of what it expected.

The row, to recap, is over whether Britain should be represented on Euro- X, the informal committee of Finance Ministers from the 11 (of 15) EU members who will sign up for the single currency launch in January 1999. Mr Brown, struggling to preserve Britain's claim to be a European pace- setter, says we cannot be excluded from what might become a crucial decision- making body. To which the others retort that Britain cannot have its cake and eat it - or, in the charming formulation of France's finance minister, that the common currency is a marriage, and "partners in a marriage do not want anyone else in the bedroom". And that was that. Our Iron Chancellor left with a flea in his ear, and a lesson learnt the hard way: don't pick fights you can't win.

For whatever happens, the Euro-club members will confer regularly among themselves on economic policy. The British can throw the rulebook at them and prevent them meeting on EU premises on the grounds that some EU members are being excluded; in which case the 11 can repair to a local brasserie to deliberate, or do the whole thing by conference call between their capitals. If they don't want the British along, they won't have them.

And to make matters worse, the quarrel was unnecessary, even counter- productive. All it has done is raise the profile of a committee which the Germans anyway would have made sure did not interfere with Bonn's goal of a single currency managed by a European central bank as austere, unbending and apolitical as the Bundesbank. And where had Mr Brown got the idea he might get in? Certainly not from the French at the Canary Wharf summit last month. Perhaps from the Germans. But force the Germans to choose between France and Britain on an article of European faith such as the single currency, and they'll go with the French. Thus was another miscalculation exposed. The Government thought that simply by dint of the fact they were not Tory, and because they talked positively about the European enterprise, their partners would fall over themselves to accommodate every British demand. Not so.

But all is far from lost. Despite the Euro-X spat, this Government is infinitely more benignly regarded in Europe than its squabbling and bloody- minded predecessor. And so to Waterloo and the Presidency, a six-month turn under the lights. True, Britain will be on the sidelines as the key EMU decisions are taken (who's in, and at what exchange rates). But Messrs Blair, Brown, Cook and the assembled cast will have every opportunity to shine, organising 50 summits and ministerial meetings over the six months, setting agendas, launching EU enlargement and driving through decisions on the environment, drugs and crime fighting - all grist for the Blairite mill of a "People's Europe." And finally there is the "bully pulpit" power of the EU presidency, of which the Government is making much.

But as Mr Brown found out this week, you can bully Europe only so far. More important is this new chance of reminding the domestic audience of the merits of the European Union. "Message" is something this Government excels at. There will be glitzy logos and catchy initiatives, all designed to implant the notion that Europe - and by extension the single currency the Government insists it wants to join - is a good thing. But first that Euro X business must be buried. Let Mr Blair grasp whatever face-saver is on offer at next weekend's Luxembourg summit, for nothing would do more to spoil his Presidency than endless headlines proclaiming "New Row over Europe". It wouldn't be 1992 all over again, but it could get very messy.

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