Stephen Wall: The real damage from this rift over Iraq

Future British governments acting without EU agreement should be the last resort

If the United States has demonstrated the uses - and abuses - of hard power, I believe we in Europe have demonstrated the value of soft power. In an unstable world, the spread of democracy and its values through most of the European continent is one of the things which the EU's founders hoped for but probably did not expect to see.

European foreign and security policy is also a growing success story. We actually do things, as well as talk about them. Enlargement is a foreign policy success. Our network of trade and aid relationships is a foreign policy success. The establishment of the European Defence Agency, our presence in the Balkans, are a foreign policy successes.

But that optimistic view overlooks one hugely damaging event: the division of Europe over the Iraq war. We have not yet recovered from it. Mistakes were made on all sides. Whatever the rights and wrongs of Britain's decision to accompany the United States to war in Iraq, I believe it should be the determination of every British government in future to put reaching an agreement at European level at the top of its list of priorities. We should not agree to act only if there is European agreement. But acting without such agreement should be the last resort.

The divisions over Iraq were symptomatic of a crack already running down the European Union. But Iraq turned what was a crack into a fracture. Because that fracture has remained unhealed, it has been far harder for the leaders of the European Union to come together in an agreed view of how to tackle the most serious problem challenging Europe, namely how to manage globalisation.

I believe that the regeneration of the European economy, and of the European project, can only happen if it is led from within the eurozone. It is hard to see the eurozone delivering for its members without a greater degree of co-ordinated economic management, fiscal co-ordination and transfers of resources from the wealthy to the less wealthy. In other words, the politics and the economics have to come together as was originally intended. We are coming to the end of the road where a European Union based on free trade within, and a degree of protection without, is sustainable.

The British Government is correct in its analysis of what needs to be done to meet the challenges of globalisation. But we find ourselves in a vicious circle. The state of the eurozone makes it almost impossible to win a referendum on joining the euro. Yet only as part of the eurozone can Britain contribute fully to the revitalisation of the European economy, to coming to terms, as Europe must, with the challenge of globalisation.

For the problem with our own European policy is not that Britain wants no more than a free trade area. We have always wanted more than that. But we have wanted it to be determined inter-governmentally, not realising that strong, independent supra-national institutions are essential to the project's success and survival.

At this moment, rather than continue with the "wait and see" policy of both the Major and Blair governments, we should have a proactive plan for joining the eurozone as part of the steps necessary to address Europe's economic challenges. A declining growth rate and declining and ageing populations pose big problems of prosperity and social cohesion.

A European foreign and security policy has to be underpinned by a European economic success story. The question now is whether we are committed to that economic success story as a collective European enterprise, rooted in strong independent European institutions, or whether it is everyone for themselves - or some for themselves, with others left to fend as best they might.

Unless we underpin our political agenda with co-ordinated economic policies we shall not be able to deliver on the things where Europe can still take a leading role: the fight against poverty; the deployment of soft power, be it through trade and aid, or through European peacekeeping; the management of relations with Russia or China; tackling the huge challenges of migration and the even greater challenge of climate change.

The divisions on how to confront globalisation have in many ways mirrored the fractures in Europe over Iraq. The hope must now be that the advent of a new chancellor in Germany and the prospect of political change in France provides an opportunity for Europe's leaders to find common cause on the future direction of the European economy and with that, the recreation of a vision and a drive that people will respond to.

Stephen Wall was the UK's ambassador to the EU and until 2004, the senior Europe adviser in the Cabinet Office