Blair's chance to lead in Europe

The government has the political power to transform the EU, but doesn't know what to use its power for

It was never true that Britain could stop, or even much disrupt, the single currency. But it is now true that Britain could have a big influence on putting it back on course: in the jittery, confused atmosphere after the French change of policy and Chancellor Kohl's defeat by the Bundesbank, just imagine the effect of a clear, pro-EMU statement by Tony Blair.

He wants to be a leader in Europe. If he stood up now, over the next few days, and spoke out strongly for monetary union, he would be an instant hero in Brussels, and perhaps have great influence over the terms on which monetary union then advanced. Good idea?

Alternatively, imagine what John Major would have done with the mayhem. He would have been gloating over the French revolt, and noting that the Bundesbank was nearer to German popular opinion than Kohl. It is hard to imagine a Tory administration living through the past few days without declaring openly against the single currency. That would have gone down well at home. It still would, if Tony Blair acted similarly: Britain vindicated! Good idea?

The Prime Minister has resisted both temptations. He still believes monetary union will happen, and is prepared for Britain to enter on the second wave. It would, perhaps, be odd if he suddenly emerged now as the defender of the euro, having been so cautious before. He is watching - not gloating, but not helping, either. He is standing by as Europe's pet project goes into purple-faced seizure. "Thou shalt not kill; but need'st not strive/Officiously, to keep alive."

This is perfectly sensible, given the seriousness of the Continental crisis. In a way, both Jospin's victory, with its anti-austerity rhetoric, and the Bundesbank's brutal defeat of Kohl, were old-fashioned and powerful expressions of French and German national identity, outbursts against final integration, one with another.

The French socialists' demands for an expansionist "European economic government", and the inclusion of Spain and Italy in the first wave of monetary union, assert an idea of France, as the statist and semi-protectionist leader of the Mediterranean bloc, that terrifies the Germans. And the Bundesbank's refusal to allow the German government to fiddle its way into the Maastricht conditions was a defence of the virtuous D-mark, the key symbol of post-war German identity, against the unpopular, polyglot euro.

Given the angst on both sides, it is hardly surprising that Blair has not leapt to defend EMU: why sprint to catch a train that may be just about to crash off the rails?

This means, however, that he will not be an important voice in the most important debate confronting Europe. He will not seize the opportunity to help bury monetary union, or to save it. So how will he lead?

After all, on the face of it, he has a wonderful opportunity to do so.Whereas Major was seen as a loser who had no deep sympathy for the EU, and whose party was divided, Blair still has the rosy glow of victory on him. His huge majority and his disciplined party ram home the message to other EU leaders that he will be in power for a long time. They are well aware that a dangerous gap has opened up between Europe's political leadership and its people - and perhaps this man has ideas on how to close it? In sum, what Blair says will be listened to.

Yet on the three key areas where Labour says it wants progress in Europe - labour-market flexibility, expansion to the east, and the completion of the single market - you could hardly put a cigarette paper (to use the previous prime minister's phrase) between triumphant Blair in June and hapless Major in April.

True, Gordon Brown has been more vigorous, pushy and optimistic on the jobs front than his predecessor, who suffered from the general disregard felt for his government. He and Blair are entirely right about the importance of jobs, and flexible labour markets, and the need for our European time zone to compete effectively with the American and Asian time zones.

But there is a long way to go. If the New Labour approach is to mean anything more than Thatcherism with a different rhetorical twist, it will require bigger investment in retraining and education than anyone is yet committed to. And retraining alone will not save the EU if monetary union falls apart. There needs to be a political agenda, too.

At the coming Amsterdam summit it is hard to see any huge difference in the British positions caused by the general election. The tough anti- federalist lines on border controls, policing, defence and so on will seem familiar to other European governments - indeed, where the approach is different it is because Labour is taking a harder line than the Tories. There is a slightly greater openness to qualified majority voting in unimportant areas, and the well-trailed difference over membership of the social chapter; but, in the grand scale of things, these are footling.

This adds up, doesn't it, to a new government which wants to transform our relations with the rest of the EU, and has the political power to do so; but which doesn't yet know what to use its power for. There is a disjuncture between Blair's European stature and Blair's current European agenda.

No one in Downing Street will be much worried about that. A leader who promised Sun readers that he would patriotically stand up to nasty European federalists would be content to return from Amsterdam with assurances on borders and defence, and a few concessions on majority voting in abstruse areas. But the opportunities for a new era in British relations with the Continent are far greater than that.

Above all, whether the Euro goes ahead or not, Europe badly needs some radical political rethinking. Tony Blair was elected on a platform which stressed inclusion and jobs, and he has taken that message to other EU countries whose leaderships are far less popular, and who are therefore interested in his message. But he was also elected on a programme of democratic reform. Wouldn't it be right, too, to turn that agenda on a European audience?

Yes, they have PR and we don't. Most other countries are already less centralised than Britain. None of them has a hereditary chamber. That is the unfinished business of Britain alone.

But Europe needs reform, too. I don't believe the EU can survive without a simpler, more understandable and responsive political system. How can the rambling, Byzantine hierarchy of committees and acronyms, accumulated over decades of deals and compromises, be compatible with popular consent? We need an open, public Council of Ministers, a reined-in Commission, and even a European constitution, which makes clear the limits to "ever- closer union". What we don't understand, we will end up hating.

If EMU goes ahead, European political reform will become essential. If EMU collapses, it will be the only alternative agenda left for a traumatised Union. Yet no mainstream leader is seriously discussing it; virtually no work has been done on it; barely a single speech has touched on it. Europe desperately needs somebody with the confidence and power to grab this agenda - someone who is going to be around for a while, and has courage and vision. Now, who could that be?