UK 'would lose power' outside euro

All but three of the 15 EU member states have joined

Britain risks losing its position as a "decisive" European power if it rules out membership of the euro, Europe Minister Peter Hain has warned.

As 12 of the 15 EU countries started using the euro on Tuesday Mr Hain told the BBC the success of the currency was vital to British jobs and prosperity.

It will cease to be that source of myth and prejudice and fantasy and fear and will become a practical day to day reality

Peter Hain
Europe Minister

But the euro launch has done nothing to shake the opposition of the Conservatives, with party chairman David Davis insisting British people want to keep the pound.

And Liberal Democrat Trade and Industry spokesman Vince Cable called on ministers to declare their hand and campaign for the euro.

Speaking on BBC Radio 4's Today programme, Mr Hain said accepting the Conservative Party's position would marginalise Britain.

He refused to be drawn on a referendum date, but said the currency's introduction elsewhere in Europe would help people decide.

"It will cease to be that source of myth and prejudice and fantasy and fear and will become a practical day to day reality and that will enable people to make a sensible decision about it," he said.

It is thought the currency will become more familiar as many British shops price their goods in pounds and euros and more than 40m Britons travel to Europe on holiday.

Mr Hain also predicted Britain would be unable to choose the route of using the euro, but retaining the pound and control of its own interest rates.

He said he doubted whether, in the end, it was possible to have a "kind of parallel currency economy".

'Fundamentally flawed'

Underlining the Tories' opposition, Mr Davis told BBC Breakfast up to 70 per cent of British people are still against giving up the pound.

He said Britain, as the world's fourth largest economy should retain control of its economy.

"It's not right for Britain, certainly not for the foreseeable future as we can see, because it is fundamentally flawed."

"It's a problem that you have a one-size fits all interest rate across Europe.

Bill Morris, leader of the Transport and General Workers Union, urged the government to rule out a referendum until after the next election, to focus on public services.

He said a "euro lemming leap...in the dark" at the moment was "not the best decision for Britain".

Delay criticised

Liberal Democrat Mr Cable told Today: "The government should be clearer about whether it sees Britain entering EMU with the current parliament or the next and making the case for it."

"The longer this whole issue is postponed the more damage that is going to be done in terms of key British interests."

In Brussels, European Commission President Romano Prodi said decision on whether to join was one for the UK alone.

But he declared that the arrival of single currency inevitably meant "common rules" for running national economies in the eurozone.

He said the European Union had taken "a major step down the path which leads ineluctably to greater convergence of economic rules".

The other countries still outside the euro are Denmark and Sweden.