Portillo attacks attitude towards European trade: Chief Secretary lays down marker for right in run-up to elections, writes Donald Macintyre

MICHAEL Portillo, Chief Secretary to the Treasury, put down a marker for the Tory right's approach to the European elections yesterday with an aggressively critical attack on the European Union for its protectionism and uncompetitive labour costs.

Mr Portillo, one of the Cabinet's leading Euro-sceptics and favoured by Baroness Thatcher as the next party leader, said Europe tended to have the 'highest wage rates without very high productivity, some of the longest holidays and some of the shortest working weeks in the world'. He told the American Chamber of Commerce, in London: 'The world does not owe Europe a living - a fact Europe has to understand.'

Mr Portillo sharply criticised the EU for underperforming in opening up markets to eastern Europe, adding: 'We have put restrictions on Polish suits; we have been very reluctant to admit Czech and Slovakian steel. We have been niggardly about admitting sauerkraut and jam.' Mr Portillo said that western Europe had to make the sacrifices in admitting imports that were necessary 'to underpin the new democracies of eastern Europe'. And he reeled off a list of statistics designed to contrast Europe's competitiveness with that of Japan and the US.

While Britain had taken steps, through deregulation of the labour market, to improve its performance, jobs had increased in Europe by 1 per cent a year compared with 1 per cent for Japan and 2 per cent in the US. Although British trade had steadily increased with Europe 'the fact is that Britain still does 45 per cent of its trade with countries outside the European Community'.

Pointedly praising President Clinton for his promotion of the Gatt and North American Free Trade Area deals, the Chief Secretary said: 'There is a pressing need for free-trading nations like Britain and America to join together to combat protectionism and uncompetitive structures that are shored up by protectionism.'

Mr Portillo's speech - coming the day after Douglas Hurd, the Foreign Secretary, foreshadowed the European election campaign by committing the Tories to a free-trading Europe - contained nothing which conflicted with Government policy. A speech which he had planned last month was never made after Downing Street had ordered a number of changes and deletions. But the tone and thrust of yesterday's speech underlined that Mr Portillo, who caused controversy earlier this month with remarks denouncing foreign corruption, and his fellow Euro- rebels feel free to be critical of European institutions and policies in the run- up to the June elections.

Mr Portillo was speaking after a dismissive response by Michael Heseltine, President of the Board of Trade, to the call by Norman Lamont, the former Chancellor, for the Government to promise a referendum before any decision to join a single currency.

Mr Lamont had said on Monday that the British had been explicitly told during the 1975 referendum that membership of the Union would not involve a single currency.

But Mr Heseltine said on BBC Radio's Today programme that a single currency was 'not on the agenda'.

He added: 'I don't think you will find in the pubs and clubs of Britain the words of Norman Lamont are on everyone's lips.'