Tony Blair is too scared to call the euro referendum

I've come reluctantly to the conclusion that Tony Blair is not going go for a euro referendum before the next election. It's a question of political calculation – courage, if you prefer. You can feel in the conversations of power that the issue is slipping down the agenda. Every time the possibility comes up, the risks look too great.

The irony, of course, is that, in terms of hard economics, the conditions for joining are measurably improving. The euro is beginning to strengthen and, if there is a rate rise next month, should strengthen further. The major economies of Europe are beginning to grow again, rather more rapidly than the UK on the latest figures. Europe's new conservative leaders – and the old one, in the case of Chirac – are all pledged to tax cuts and deregulation, which should boost activity even further.

If Blair had the courage to go for a referendum next year, it is perfectly possible that Europe would be motoring nicely along, sterling would be in much better alignment with the euro, and the advantages of us joining would seem much more obvious.

Nor does Tony Blair need to worry too much about the wind from the right now blowing across Europe. He may, as some suggest, still harbour dreams of a centre-left revival. But the conservatism that has brought in right-wing governments in Madrid, Lisbon, Rome and Scandinavia, and is likely to change the administrations of Paris this month and Berlin in autumn, in many ways suits the British purpose. A series of nationalistic countries pursuing their own agendas is far more attractive to the British than a group of centre-left countries hell bent on European integration.

And then there is the fact, as Blair himself has spent time promoting, that these right-of-centre governments are much nearer to Blair and Brown's neo-Thatcherism than Lionel Jospin or Gerhard Schröder. A Europe singing from the Anglo-Saxon hymn sheet of deregulation, privatisation and low taxes is infinitely more attractive than one wedded to state intervention and high social security.

But the other side of the coin is a Europe that is rapidly losing all coherence. The voters of Europe in recent elections were not giving voice to a great desire for the free market or Thatcherite policies. They are voting primarily for parochial reasons and negative ones at that – fear of immigrants, resentment of outside forces. It is a mood that has little time for Brussels, few aspirations for Europe and much foreboding about the issues coming up in Europe. Enlargement and institutional reform to meet it are both likely to be messy businesses in which the voices coming from Europe will be fractious, self-interested and defensive. A political leadership shaken by the success of Le Pen and the far right will follow rather than lead.

On one view, this is the very time that Britain should be throwing its weight into the debate. And in many ways that is the Prime Minister's instinct. He would love to be the lead figure articulating a vision of the European future, putting Britain not just at the heart of Europe but at its head.

But there are two powerful factors holding him back. One is his own managerial style. Tony Blair is by instinct a bilateralist. He likes a board on which he can join forces at will for specific purposes – with France for European defence, with the US for global military intervention, with Berlusconi for deregulation, with Spain on taxation and so on. It's a style that suits international co-operation when the going is smooth – the Europe of the Sixties and Seventies for example. But it is not a manner that works when the going is rough and you need real teamwork of several parties working with a common aim to pull you through.

An alliance of the big boys can drive Europe forward, as it did after the fall of the Berlin Wall, but a group of countries squabbling over votes allocation, including Britain, disillusions the smaller members and fragments the major partners. On Europe, Blair is good at articulating individual interests, but not a common dream.

His second problem is really his own self-confidence. At his best, in the Kosovo war and immediately after 11 September, the Prime Minister feels the sense of public aspiration and draws his strength from it. But that has gone over the last few months. The alliance with America has proved one-sided, the vision of a new and better world a chimera. When it comes to Europe there is no sense of a union reaching for a future, just a group of nations quarrelling over their separate problems.

And the British public know it. If the voters are to vote yes to the euro, they need to feel not just that there is something that they are missing out on (still to be proved) but also something that is moving forward towards a goal they wish to participate in, which just isn't there at the moment.

Everything in one wants Tony Blair to grasp the cloak of history as it passes by, as Chancellor Kohl, quoting Bismarck, said of German reunification. Enlargement and institutional reform open the way to a wholly different and dynamic future for our children. And Britain has a role as well as a need. But, as a journalist, every instinct senses that Blair is looking at the chasm, would love to leap it but will ultimately decide that the risks are just too great.

a.hamilton@independent.co.uk