He unveiled a commission headed by former Tory Defence Secretary Sir John Nott to examine the implications of the euro if the UK sticks with the pound.

The move is intended to counter the National Changeover Plan set out by Prime Minister Tony Blair two weeks ago.

Sir John Nott - described by Sir Robin Day as "here today, gone tomorrow" - is back

The Conservatives are boycotting the committee set up to implement the changeover plan, insisting its true role is to persuade Britons membership of the European single currency has become "inevitable".

The Tories' strategy is unveiled as the president of Germany's Bundesbank, Hans Tietmeyer, warned against an interest rate cut by the European Central Bank because of the euro's weakness on currency markets.

Both Barclays Capital and the Commonwealth Bank of Australia forecast the euro will be worth less than one dollar by the end of the year.

When it entered the markets on 1 January 1999, each euro was worth $1.17, but this has since dropped to around $1.08.

Sir John is charged with putting a positive case on the crusade against the UK adopting the euro.

Speaking at the launch of his commission, he said: "There are 400 countries in the world with their own currency. I am not sure why we shouldn't have our own."

The euro's value is falling

After taking over as leader, Mr Hague won his party's backing for the stance of stating the Conservatives would not join the single currency in the lifetime of this parliament or the next.

But he still faces a strong threat from senior Tories such as Ken Clarke and Michael Heseltine who want the UK to scrap the pound.

Speaking on Monday, Mr Hague said: "There is a choice. I am setting up this commission, led by Sir John Nott, to show that there is a choice."

The commission is intended to consider the effects on the City and business if the UK stays out of European economic and monetary union.

Sir John, 67, is stepping down as chairman of the food group Hillsdown, is currently chairman and chief executive of Lazards Merchant Bank.

He previously held the positions of trade and industry secretary, economic secretary to the Treasury and defence secretary during the Falklands conflict.

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He was described in 1982 by BBC presenter Sir Robin Day as "here today, gone tomorrow" politician - a remark that led him to storm out of the interview.