Donald Macintyre: Make no mistake, Mr Blair would like us to join the euro

'Provided the obstacles are overcome, he clearly wants us in the single currency before the next election'

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Britain must pool more sovereignty in EU, says Blair

Watching Mr Brown and Mr Blair side by side in the Commons yesterday, laughing as the Tory MP Sir Teddy Taylor tried to probe their differences on the euro, it was possible to imagine quite easily that all this fuss about their relationship was imaginary.

And as it happens, to treat the question of euro entry in this parliament as if it was exclusively the function of a power struggle between Gordon Brown and Tony Blair is wrong. It's entirely possible that the economic circumstances are such that Mr Blair would readily agree that it was a non-starter before the election.

For a start, everyone serious in the Government agrees that next year's attempts – particularly but not exclusively at the Barcelona summit – to advance economic reform in the EU could well be crucial to the strength of the European economies, not to mention that of the euro. And there are considerable obstacles; both the Germans and the French have elections which could well reduce their willingness to agree reforms which could have a short-term adverse effect on their own producer interests – an issue the Prime Minister is likely to touch on in his speech in Birmingham. Are the French, for example, going to agree to liberalisation of their electricity and gas markets? If they don't, it will make it all the more difficult to persuade a sceptical public that the European economy is one worth integrating more closely with. Mr Blair knows this as well as anybody.

Conversely, it's at least theoretically possible that Gordon Brown will decide that convergence of the UK and European economies is pretty well total and that it is "clear and unambiguous" – in the stark words of the Chancellor's 1997 statement – that his economic tests have been passed.

Indeed, the strategy of the canny and experienced shadow Chancellor Michael Howard is to suggest that the latter prospect is actually probable. In the Howard scenario, Mr Brown and Mr Blair are merely playing hard cop–soft cop. Sometime in this parliament the Cabinet will decide in favour of euro entry. Because Mr Brown has been thought to be highly sceptical, his unequivocal support will be all the more persuasive as it indeed, in such circumstances, would be. This approach is a conscious choice by the Tories. They could have decided, after all, simply to exploit the apparent differences between the Chancellor and the Prime Minister for all they were worth.

The Howard strategy, however, has more to do, I suspect, with sensible opposition politics, than with his real world assessment. For a start, polls show that opposition to the euro – at least pending anything that could be described as a government campaign in its favour – is popular, rather more popular than the Tory party itself. To depict the government as monolithically in favour of early entry ought therefore to be a plus. And, second, the press, so the argument runs, will expose the differences between Mr Brown and Mr Blair without any help from the Tories. Why not leave it to it and enjoy the benefit of a two-track attack on the Government?

For the real world, as Mr Howard no doubt knows, is different. For on this issue words matter. It's true that nothing either the Chancellor or the Prime Minister have said in recent weeks diverges even a jot from agreed policy. Mr Brown is entitled to point out, for example, that his CBI speech in Birmingham was (a) strongly pro-European and (b) reminded his audience that agreed government policy was that the tests were important. If people had somehow developed the notion that they weren't then it was they, and not he, who were diverging from the policy.

But even the order of words matters. If you say that provided the economic tests are met then we are committed to hold a referendum, as the Prime Minister did again in Germany on Tuesday, then it conveys a slightly different message from saying that we will have a referendum only if the economic tests are met, even though both formulations are impeccable statements of the same policy. If you say, as Mr Blair intended to say at the TUC in Brighton on 11 September, that you believe a single currency will be successful and it is Britain's intention to join a successful euro, you are sending a clear message that you are serious about going in. It is reasonable to infer that provided the obstacles can be overcome, Mr Blair clearly wants to take Britain into the single currency before the next election and thinks he can win a euro referendum.

You send the same message if you choose to state your policy on the euro after recounting in some detail, as current drafts suggest Mr Blair will tomorrow in Birmingham, the occasions on which Britain has missed the European boat – and therefore the chance to shape Europe – by delaying entry to successive European enterprises. Especially when that is in a speech which seeks, as Jack Straw does in these pages today, to challenge the idea that sovereignty equals isolation.

This doesn't break with policy any more than have the speeches of the Chancellor. But it does convey a more positive message than the Chancellor's "pro-euro caution". So what? Well, one effect of the Prime Minister's speeches might well be to move the markets a little. Sterling might very gently fall in value as markets start to build up an expectation that Britain is, after all, likely to go in to EMU in this parliament. But as long as the Chancellor – without in any way diverging from agreed policy – fails also to advance that expectation, then such market reaction is much less likely. And that means that sterling is that much less likely to converge with the euro. And that means that British entry is less likely. Mr Blair's power to achieve this is all the more constrained because if he goes too far it will inflame reports about fissures between himself and Mr Brown.

And there are other factors – not least the subjective edges to the tests Mr Brown will apply. If the European Central Bank not only has a remit but a boss who subordinates all other goals to fighting inflation, does this make for the "flexible" economy the tests seek? One view, probably Mr Brown's, is that it is better to stick with the bank until the lessons of the Bank of England's superior regime are learnt. Another, held by most pro-euro ministers, is that you can only change the ECB remit and conduct by being inside the euro.

For all these reasons, Mr Brown remains in a strong position to affect the outcome. This is no doubt part of why this week the former minister Lord Simon expressed his frustration with the slowness of the advance to the euro. And it's why most senior Blairites affirm that a referendum is only winnable if Mr Brown not only endorses entry, but does so with all the eloquence and whole-heartedness of which he is capable.

Fair enough. But for the moment it leaves the Prime Minister sending out clear – if lightly coded – messages in something of a vacuum.

How long is this state of affairs sustainable? It would not be surprising if both men came under increasing pressure to resolve this gridlock. And to do so sooner rather than later.

d.macintyre@independent.co.uk