Within a few months of becoming prime minister Mr Blair made his mind up: he decided to put off making a decision.

He had already, in the run-up to the election, announced that a Labour government would not join the European single currency until voters agreed to do so in a referendum. But he had also insisted that it was important to keep the option open in order to maintain "any influence we have over the process".

Blair: Bold declarations of leading in Europe

Once Mr Blair was in Downing Street his new government, unnerved at the fevered reaction to spindoctored hints that it might hold an early referendum on EMU, ruled out joining it altogether for the duration of this parliament.

That decision dismayed Labour's pro-Europeans. A referendum on joining the euro was always going to be a tricky thing to win with the Tories and the Sun newspaper guaranteed to run a ferocious, Union Jack-waving "save the pound" campaign.

But instead of ruling out the poll, was holding it straight away not an obvious solution - fresh after Labour's election victory, and with the party enjoying sky-high opinion poll ratings that could not last?

"We discussed that option long into the night," says one pro-EMU minister involved in the discussions on how to handle the issue. But in the end Mr Blair opted for delaying the euro's E-Day.

Knock-on effects of delay

The prime minister and his cabinet soon came to regret this as the knock-on effects of that decision became apparent.

The announcement that the UK would not be joining before the next general election certainly contributed to the strength of the pound, as the financial markets correctly calculated UK interest rates would remain higher than in other, Emu-joining countries across the EU.

Schröder: A new centre-left government for Germany

Despite bold declarations at home from Mr Blair and his ministers that the government would lead in Europe, their EU partners saw no need to involve the UK in important discussions on how the single currency would proceed when it had made clear it did not wish to be a part of EMU for the foreseeable future.

European politics moved into a different direction as well.

With Gerhard Schröder winning the German elections in September, 13 of the 15 EU countries were ruled by centre-left governments.

More importantly, France and Germany - which had historically acted as the joint-powerhouse of European integration - now had administrations in place that were significantly more left-wing than Labour.

Is Tony Blair destined to be as isolated in the EU as John Major?

This new social democratic accord was in contradiction to the more fiscally orthodox, anti-inflationary line Mr Blair and Chancellor Gordon Brown have pursued since they came to office in 1997.

The realistic possibility of a Europe-wide neo-Keynesian, reflationary economic policy was suddenly back on the agenda in Brussels.

Pro-Europeans within Labour began wondering if Tony Blair was destined to be isolated within the EU in a way similar to that of his predecessor, John Major.

Tory trouble

Of course, Labour is far from alone in having serious problems over EMU. All the main political parties have found it a thorny issue.

The single currency has caused the most serious split in the Conservative Party since World War II. It was at the root of the resignations from Margaret Thatcher's cabinet that paved the way for the leadership challenge that eventually toppled her as prime minister in 1990.

Hague: His split party will not let the issue rest

The wounds have not healed. Current Tory leader William Hague has ruled out joining a single currency for the duration of this and the next parliament. He won support for this policy in a ballot of party members in October.

He hoped that would put the issue to rest and allow the Tories a clear run at painting Labour as the party that would lead the UK into being engulfed by some kind of federal European super-state.

Things have not worked out that way for Mr Hague. Whenever he launches a Euro-sceptic attack on the government, he only highlights the opposition's own internal divisions as big-name pro-European Tories rush to disagree with him.

Clarke: The ex-chancellor opposes his party's euro policy

Labour has its own divisions over Europe, but they tend to fade into the party's giant parliamentary majority.

The Conservatives have no such luxury. Ex-Tory cabinet members like Kenneth Clarke, Chris Patten and Michael Heseltine - all far better known to the public than Mr Hague - have made clear they are likely to campaign against the party line in a referendum.

Lib Dems backtrack

Even the Liberal Democrats, the most EMU-friendly of the three main parties, have felt the need to backtrack on their Euro-enthusiasm.

Ashdown: Has tempered his Euro-friendly rhetoric

Paddy Ashdown's party has long been committed to joining a single currency. But in the face of attacks on its unequivocally pro-European stance it has recently tempered its previous support for a "federal Europe", and devoted more attention to raising the issue of reforming EU institutions.

Mr Ashdown's latest outline of his vision of Europe's future included proposals for a constitution for the EU and a statute of limitations detailing which responsibilities lie with Brussels and which with nation states.

Referendum worries

All the main political parties have, in their own ways, formulated their EMU policies with one eye looking over their shoulders at the populist anti-single currency majority in the UK press and the task of converting the public to the idea of switching from the pound to the euro.