By Brendan Donnelly

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At the beginning of this year, the likelihood of the government's holding and winning in 2003 a referendum on British membership of the euro was already slight. Public opinion remained stubbornly hostile, Gordon Brown was unenthusiastic and influential voices within the Labour party were arguing that domestic questions were more pressing than the single European currency. Three months later, even that slight likelihood of a referendum in 2003 has ceased to exist. The implications of this go well beyond the mere closing down of an option for timing which the government had hoped to keep alive for a little longer.

The bleak truth is that in the early months of 2003 severe, perhaps irreparable damage has been done to the prospect of this Labour government's being able to take Britain into the euro in any foreseeable future. The feuding and European divisions of the past weeks have not just provided a thousand quotations from British ministers abusing their European partners, all of which quotations will be gleefully flung back at them during any referendum. The decisions made and the options taken by the Prime Minister over the past year have been a living disavowal of those ideas about Britain's position in Europe and the world which had previously seemed to underlie New Labour's foreign policy.

When Mr Blair came to power in 1997, one of his principal public aspirations was to seal and consolidate Britain's position as a leading and self-confident member of the European Union. Today, this aspiration seems far indeed from realisation.

Nobody who has followed the extraordinary events of the past three months can doubt for a moment that, for Mr Blair, his and his country's dealings with the United States outrank in importance by several orders of magnitude any other bilateral or multilateral relationship. In particular, the "special relationship" is incomparably more important for the Prime Minister than his and country's relationship with the two politically and geographically central countries of the European Union, France and Germany.

When the time came to make a choice, the Prime Minister not merely chose America, but did so in the most emphatic and demonstrative fashion possible. The hostile rhetoric employed in recent weeks by Mr Blair and his ministers about France and Germany is without precedent in dealings between neighbours and close allies. The British electorate will be understandably disoriented if at any time in the near future Mr Blair asks them to reinforce their relationship with France and Germany by joining the euro. Such a recommendation coming from him, after all that has been said and done, would be in the most literal sense incredible. When the current talk in Washington is of "containing" or taking revenge on France and Germany, it is in any case clear that the present American government would view early British membership of the euro as something very like an act of betrayal. The likelihood of Mr Blair's being willing to risk such displeasure cannot be assessed as high.

Over the past six years, the Prime Minister and his Chancellor have always presented the question of British membership in the euro as essentially an economic one. In this, they stand squarely in the tradition of successive British governments that have ignored, underrated or denounced the eminently political nature of the European integration ushered in by the Treaty of Rome.

But any euro referendum ever held in this country will rightly have a substantial political component. It will be decided partly, perhaps largely, by arguments revolving around British national identity, about our role in the world, about just who are our truest friends and what is the model of society to which we should aspire. These arguments are infinitely more accessible to the electorate at large, and much more likely to stir political passion than the economic arguments, which for a number of years to come, are likely to remain speculative, controversial and elusive. It is a major criticism of the government's ill-coordinated preparations since 1997 for holding a euro referendum that it has done so little to elaborate a coherent political case for British membership of the single currency.

It may well have been the Prime Minister's original hope that the economic arguments in favour of British membership of the euro would at some point in the future become so clear that a referendum could be won simply on the back of them. That has certainly not happened yet, and is unlikely to happen in the near future.

If Britain is to enter the euro in anything other than the very long term, it is urgently necessary for this government to develop and publicise a political rationale for joining which is centred on a coherent vision of Britain's European future. At the heart of that vision must lie the belief that no international relationships are or can be more important to us than those we have with our closest European neighbours, notably France and Germany. Our continuing absence from the euro stands in flagrant contradiction of that belief, which is why the United Kingdom should bend every effort to join the single currency as soon as practically possible. Sadly, it will be a long, long time before Mr Blair can again be a plausible spokesman for any such a Eurocentric vision of Britain's future.

Brendan Donnelly is Chair of Federal Union and a former MEP. He is now Director of the Federal Trust, and may be contacted at brendan.donnelly@fedtrust.co.uk. This article was first published by FT Online. The opinions expressed are those of the author and not necessarily those of Federal Union or the Federal Trust. 27 March 2003.