Focus: Can they save the pound?

Tony Blair's statement on EMU suggests the Government's strategy is set, but the Eurosceptics still want to do battle

A group of Eurosceptic politicians and businessmen met for lunch recently to discuss their tactics. As they drained their good quality claret and moved onto coffee, they began debating what slogan they should use to launch their campaign to stop Britain joining the single currency. Dozens of options were thrown around - then a deathly hush fell on the table as a piercing voice cut across all others. Baroness Thatcher, the high priestess of Eurosceptics, had opened her mouth. "Save the pound," she said to terrified silence. "Save the pound." But can they?

On Tuesday, as Tony Blair took to his feet in the Commons to make his statement on economic and monetary union, Britain seemed to be moving inexorably towards adopting the euro. In fact, the Prime Minister did not actually say anything new. The Government is in favour of joining the single currency if it is a success and five economic conditions are met, he said, but it will hold a referendum on the matter before any final decision is taken. Gordon Brown had said the same to MPs more than a year ago - it was a shift of gear, as Mr Blair said, rather than a change of policy.

But two things had changed. The single currency is now a reality which seems to be working. And this time it was the Prime Minister himself - not the Chancellor of the Exchequer - lauding the potential virtues of the euro. Just as important, Downing Street was also describing the statement as the most positive step towards the single currency yet. This may have been spin, but in this presentation-obsessed Government the message which the spin doctors want to get out is sometimes as important as the words themselves. The statement, backed by tens of millions of pounds of Government money to make computers euro-literate, created the impression that it was now virtually inevitable that Britain would join the single currency.

Those in favour of this prospect are gearing up for a high-profile cross- party launch, probably at the end of next month. The campaign committee for "Britain in Europe", chaired by the Labour peer Lord Hollick, is now finalising details of a "manifesto" and planning polling research. Lord Marshall, the head of British Airways and former head of the Confederation of British Industry, is being lined up as the most likely frontman for the campaign. Michael Heseltine has agreed to play a prominent role and Lord Howe of Aberavon, the former Foreign Secretary, will sit on the board. When the referendum is announced, Tony Blair will move in effortlessly behind them.

But the battles are not over yet. Tensions are beginning to surface in Whitehall about how quickly the Government should move and what language ministers should deploy to signal their intentions. According to Government insiders, Gordon Brown preferred to let Tony Blair make Tuesday's statement because he saw no need to accelerate - whether in rhetoric or reality - towards EMU. He is adamant that there should be no actual shift in policy before the next election. On the other hand, Robin Cook is now arguing that the Labour Party will have to clarify its position in the next manifesto because, by then, it will be clear whether or not the single currency is going to work. There has been a strange role reversal between the traditionally pro-European Chancellor and the historically Eurosceptic Foreign Secretary. Mr Blair's advisers in Downing Street are divided on the issue, with some arguing for a black-and-white decision and others urging the Prime Minister to stick with grey.

Whatever the Government decides, pressure from the Eurosceptics will continue to mount. Dozens of groups have sprung up dedicated to stop Britain joining the single currency. They are amassing hundreds of thousands of pounds from sympathetic benefactors, they are setting up think tanks and conducting focus groups. Mr Blair's statement gave them a new sense of urgency and they are now planning formal launches. Crucially, they also have the support of most of the media. The Eurosceptic army is a strange and powerful collection of characters but the result of the battle is far from clear.

ALAN WATKINS, PAGE 29

The Politicians

Europe is an issue which divides parties, uniting right-wing Tories and left-wing Labour MPs. Nothing else could get Tony Benn agreeing with Bill Cash. Membership of most of the Eurosceptic groups illustrates this.

Lord Owen, former Foreign Secretary and founder of the SDP, will launch his group, New Europe, tomorrow, arguing that it is possible to be in favour of Britain playing a prominent role in Europe but against joining the single currency. New Europe's supporters include Lord Prior, the former Conservative Northern Ireland Secretary, Lord Healey, the former Labour Chancellor, and Martin Taylor, former chief executive of Barclays Bank.

A second group, the Congress for Democracy, involving MPs of all parties, business leaders and trade unionists, will launch in July, with William Hague and Frank Field attending its first major conference. The brainchild of Sir Michael Spicer, Tory MP for Worcester, it is intended to be an umbrella organisation for around 50 anti-EMU organisations.

Dozens of other groups include Global Britain, a campaigning organisation and think tank run by Labour and Tory peers, and the European Foundation, led by Tory Eurosceptic MP Bill Cash. RS

The Businessmen

Like the rest of the nation, the business community is divided by a deep fault-line between those for and those against Britain joining the single currency, writes Diane Coyle.

Slowly opinion is drifting in favour of UK membership, and the two camps fiercely contest how much business support they have.

Generally, corporate Britain, headed by the Confederation of British Industry, is in favour of early membership. Other business organisations, such as the British Chambers of Commerce and the British Retail Consortium, are also broadly in favour, though members are concerned about its impact, such as the cost of converting tills to the new currency. The unions, too, are in the pro-euro camp.

The common thread is the dependence of big business and manufacturing industry on Europe. Half of UK exports go to other EU members. Industry's Europhiles see a direct link between joining the single currency and safeguarding jobs and exports.

But the mainstream business voice is often drowned out by the passion of the anti-euro camp. Its mainstays are the campaign group Business for Sterling, headed by prominent figures such as Sir Stanley Kalms of Dixons, Lord Hanson and Sir Rocco Forte, the Institute of Directors, and the Federation of Small Business.

Pro-euro campaigners note that many in the "anti" camp have business interests that might be damaged by a genuinely competitive, one-currency market. For example, the average price of personal computers - for which Dixons is the leading UK retailer - is typically higher than on the Continent. It is the kind of price disparity which will become more evident under a common currency.

Smaller businesses have a far more direct objection. They tend not to export so much, so have less to gain from Britain joining the euro. The costs of conversion far outweigh any benefit. Even so, the Forum of Private Business, which polls its members regularly on policy, said last week that opposition to UK entry was declining. Businessmen, be they running small family firms or big multi-nationals, hate uncertainty. Whether for or against, what they ultimately want is for the Government to say exactly when Britain will join.

The Press

Rupert Murdoch and Conrad Black, the two biggest media tycoons in Britain, have pledged to give money to the campaign against the single currency. Downing Street knows it will be difficult - though not impossible - for the Government to sway public opinion against the massed ranks of their titles, which include the Sun, the Times, the Sunday Times, the News of the World and the Daily Telegraph. The Daily Mail has also pinned its colours to the mast, stirring scare stories about Europe forcing Britain to pay more tax.

Press reaction to the Prime Minister's statement last week was nothing compared with what is certain to come if the Government calls a referendum on the single currency. Headlines such as "Blair's death knell for the pound" or "Blair prepares to scrap the pound" were relatively mild. The Sun's description of the German finance minister, Oskar Lafontaine, as "The Most Dangerous Man in Europe" is more likely to be typical when the battle begins.

There are some in Government who argue that the Murdoch press will switch sides in the run up to a referendum if its proprietor decides the country will vote in favour of the euro. Most think this unlikely and the Prime Minister has been devoting his energies to wooing the media media tycoon in an attempt to limit the damage. RS