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Will the euro be a casualty of Blair's Iraq war?

By Mark Leonard. Source: Observer, 14 April 2002

For Tony Blair to help to take out Saddam, fix the public services and end Britain's historic ambivalence towards Europe would take a feat of leadership unparalleled in British politics since 1945, says a leading pro-European thinker.

Every war in history has had unintended consequences. As Tony Blair returns from his Texan hoe-down having firmed up British support for "regime-change" in Baghdad, a regional war in the Middle East and a political war inside the Labour Party are being widely predicted. But there may be another unexpected casualty of an Iraq war: British membership of the euro.

For Blair to convince his country and party of the need to help take out Saddam, he will need to prove that the Iraqi dictator poses the gravest threat to global and western security. But, for a Prime Minister pledged to "focus like a laser beam" on the problems of the public services to also resolve Britain's long history of ambivalence towards continental Europe would mean fighting a political "war on three fronts". This may not be impossible - but it would take a feat of political leadership unparalleled in Britain since 1945.

The conventional wisdom is that the impact of September 11 smoothed Blair's path to the euro. Certainly the euro's opponents believe so. The Eurosceptic Telegraph splashed with "A New Currency for a New World Order" following Blair's party conference address last autumn, capturing the scale of the project Blair set out for "a new age of international community" and a new spirit of interdependence in which nations were ready to work more closely together than ever before. In the same breath he delivered his most ringing endorsement of the euro so far.

The euro's supporters were cock-a-hoop in Brighton too. After many months and years cajoling and calling for clear leadership from the top, it had arrived. Who could now doubt that it would be successful? Fear of those persistently hostile polls was forgotten. Prominent pro-Europeans predicted privately that the government could win a crushing majority, comparable to the two-thirds who voted Yes in 1975. With Britain's resolute "shoulder-to-shoulder" participation in the Afghanistan war, how could the euro's opponents cast any doubt on Blair's patriotism or his transatlantic credentials, and ability to combine influence in Europe with a place at the top table in Washington. By January this year, with the glitch-free launch of the new currency across Europe, the "europhoria" had reached new heights. Charles Clarke and Peter Hain were given a licence by Downing Street to sell the benefits in principle. Union leader Ken Jackson even called for a referendum this Autumn. The battle, it seemed, had begun.

On the surface, little has changed. Yet much of this enthusiasm has gone, to be replaced by an uneasy mood among pro-Europeans. While the merits of an Iraq war and euro membership are quite separate issues, there are a number of reasons why the political strategies required to achieve these objectives may become intertwined.

The most important issue is that of timing. For all of the heated media debate about Saddam now, there will need to be a long diplomatic and military build-up to any offensive, most likely to occur this autumn or next spring. Yet the autumn has also long been seen as the key moment for a major, public pro-European push. As much of the British public return from continental holidays having experienced the tangible reality of the shiny, new currency, the pro-euro arguments could expect a better hearing than ever before. Pro-Europeans hope that the Queen's Speech will include a Bill paving the way for a referendum. The late autumn is also exactly the time when Gordon Brown is due to start his official assessment of the economic tests.

But it is at precisely this time that Tony Blair will have an intensive role as international cheerleader for the War Against Terrorism Phase 2 - rallying opinion, smoothing egos and painstakingly constructing global coalitions. Any modern war is a battle for public opinion. Western nations do not risk losing wars like those in Kosovo, Afghanistan or even Iraq on the battlefield: it is the "wobbles" at home and on the international diplomatic scene which are the primary threats to the success of prolonged military missions. Can Blair win the public argument for the war and at the same time make the argument for the euro? High summits in Damascus won't leave much time for the kind of Town Hall Meetings in Dagenham that will turn public opinion on the euro around. And a media distracted by war will work in favour of the euro-sceptics who have an interest in closing down debate and keeping public opinion where it is.

The politics of combining these two campaigns may prove impossible. Blair is rightly neuralgic about being seen to lose touch with domestic political priorities. The Prime Minister's biggest political priority, beyond the prosecution of an Iraq war, will be to show that he remains motivated by the manifesto pledges on schools, hospitals and the economy on which Labour will be judged by the electorate in 2005-6.

Ever since Kosovo, Downing Street has feared that admiration for Blair's resolute international leadership may not prevent this "disconnecting" him from those who have voted for an ordinary, "in-touch" family guy who shares their priorities. Blair seeks to square the circle by stressing the gravity of the international crisis and the changed nature of an interdependent world in which he cannot deliver domestic success without international engagement. But the penance for each day spent ciricling the world on BlairForce One is three days of visits to cancer wards in the West Midlands. The Conservative opposition have finally shifted their tactics to put health and education first. Yet the government's need to do likewise plays into the "no" campaign's comfort zone, with their Sex Pistols-inspired slogan of choice: "Never Mind the Euro. What about Schools and Hospitals?"

Blair will also need to consider the impact of a euro campaign within the Labour Party. The euro issue may not seriously split the Labour party, but it will require a debate within it, not least about political priorities. Labour has very few modern sovereigntists to take up the mantle of Peter Shore while the Keynesian left, concerned with the ECB's monetarism, are much weaker than they were at the time of Maastricht. But dissent on Iraq and growing backbench grumblings over the domestic agenda could play into the euro debate in unpredictable ways.

Fourthly, there are the economics. Gordon Brown remains as Delphic as ever on the euro. But concerns over the cost of the war and increased spending on the military and security services will increase his bargaining power, while the unpredictable economic impact of a Middle East campaign could prove destablilising. An economic downturn in the Eurozone could shelve any hope of a referendum at all.

Finally, there is the danger that a European rift over Iraq will cool Blair's ardour for the European project and his ability to sell it as Britain's necessary destiny. Blair's core pro-European message - encapsulated in his "superpower, not a superstate" soundbite - is that being part of Europe enables Britain to have a voice on the world stage and punch above our weight. This has been underpinned by the claim that "Europe is going our way" - from economic reform to the loosening of the "ever closer union" project of earlier generations, especially in the light of EU enlargement. Blair's claim is that we need not be afraid of Europe distorting British priorities, because we are setting its course and leading the way. But if the focus of future European summits were to be a recalcitrant Europe trying to block British-backed US military action, both of Blair's claims would be undermined.

This is the pro-European nightmare scenario. Did Blair's unguarded aside at the Barcelona Summit that "it was a joy, as ever" mark more than the frustrations of anyone esconced in an conference centre on a Saturday afternoon? Were they the words of someone who has grown tired of the laborious deal-making and compromise that dominates the EU, with its all-night squabbling over QMV re-weighting and the next small steps towards CAP reform? Is Blair not tempted to contrast the frustrations of Euro-summitry with those homely chats on the Presidential ranch where two men can make clear decisions and back them with force?

This danger, at least, is overstated. Blair's ability to win standing ovations in small-town Texas does not make him Margaret Thatcher in a Paul Smith suit. Those who believe that in power projection and the unique virtues of the transatlantic bond may have a flush in their cheeks - but their passion for Labour Prime Ministers will go unrequited. Anyone who thinks that Blair will deliberately opt for splendid isolation alongside the US underestimates his strategic vision. Blair's project is a fundamentally multilateral one - this was the message he took to an American audience, and one delivered with European support. He may be uninterested in the politics for politics' sake which is the hallmark of Brussels summitry, but that is no reason to suspect he has taken his eye off the bigger picture.

And the Iraq issue itself is not yet decided. Blair backed US objectives last weekend, but stressed that the means remained open for discussion. The object of controversy may yet narrow from an attempt to topple a world leader into a mandate for controlling weapons of mass destruction. UN backing will be sought and Arab acquiescence found - however grudgingly - before Blair commits himself to another desert adventure. The tactic of stoking up a debate about worst case scenarios and following it up with sweet and reasonable reforms will be familiar to anyone who has watched a New Labour Budget in the making.

But while Blair has more influence in Washington than any other international leader, he does not control the agenda on Iraq. The danger for the euro may not be one of principle, but it could involve a major clash of political priorities. The fate of the euro debate may seem relatively trivial compared to either the imminent loss of life or the danger of Saddam's WMD arsenal. But this is precisely the point. The unerring ability of British governments to miss almost every opportunity in our relations with continental Europe for almost fifty years has seldom been based on principled euro-scepticism. The story has always been of priorities slipping, of the time not being quite right, of other issues needing to take precedence.

Pro-Europeans fear that, if missed in this parliament, the euro opportunity may not present itself seriously again for a decade or more. Blair's own view appears to be that he can pull it - all of it - off. The Prime Minister reportedly sounded more pro-European than ever at a private meeting of Labour MPs and if anyone has the guile to fight this "war on three fronts" it is Blair. But for pro-Europeans a niggling doubt will remain. They have been jilted at the altar one too many times.

Mark Leonard is Director of The Foreign Policy Centre and co-editor of The Pro-European Reader(Palgrave £16.99). He writes a monthly online column for Observer Worldview.