Brown and Blair at odds over more EU Parliament powers

Gordon Brown is opposing proposals supported by Tony Blair to give the European Parliament more power under a sweeping review of the way the European Union works.

The Chancellor of the Exchequer, who is less keen than the Prime Minister on early membership of the single currency, has now struck a sceptical note about a new EU blueprint being drawn up by a convention headed by the former French president Valéry Giscard d'Estaing.

Mr Brown is warning that plans to allow the European Parliament to choose the President of the European Commission would amount to an unacceptable loss of national governments' sovereignty. At present, the Commission President is selected by the leaders of the 15 EU member states.

The Chancellor's intervention in the political debate over the EU's future has caused a headache for Mr Blair. The Prime Minister wants to give MEPs more influence over the choice of the Commission head as part of a trade-off under which other EU states will back his plan for a powerful President of the European Council, composed of the 15 national leaders. The so-called "Mr Europe" would drive through the EU's agenda and represent Europe on the world stage, replacing the current system of "musical chairs" under which one EU state holds the presidency for a six-month spell.

Mr Brown's opposition has surprised some of his cabinet colleagues. One said: "We don't understand why he is making a fuss about this. It's hardly a great threat."

Another minister said the plan would include guarantees to ensure the 15 EU leaders kept an "armlock" on the selection of the Commission chief. It is believed that the leaders would nominate a shortlist for the European Parliament to consider and would also have to confirm its choice – in effect, giving them a veto.

The Cabinet will discuss the new EU blueprint shortly. Some ministers intend to widen the debate to include the single currency. They will seek to stop the Chancellor ruling out a referendum on euro entry until after the next general election when he makes a statement on the Government's euro policy in the next few weeks.

There are growing indications of opposition within the Cabinet to the Chancellor's cautious approach towards the single currency.

Yesterday, Peter Hain, the Secretary of State for Wales, became the first cabinet minister to say that the pound had fallen to levels against the euro that would make British membership possible.

He told the Financial Times that sterling had "adjusted to the kind of territory" against the euro where Britain could join the single currency at a sustainable level.

Mr Hain added that it was "peculiarly illogical" to assume that Britain should consider joining the euro when its economy was relatively weak. "In my view, the case to go into the euro is strengthened by Britain being stronger," he said.

Mr Brown is widely expected to deliver a "not yet" verdict on whether the Treasury's five tests for joining the euro have been passed. To prevent uncertainty and speculation on the Government's intentions, he would like to rule out a referendum until after the next general election.

But Mr Blair wants to keep the option open. He is reported to want the Government's next assessment of the euro to use different tests, including progress at the convention on the future of Europe.