Mandelson widens euro split

Tony Blair's speech to CBI was overshadowed by Peter Mandelson

By BBC News Online's political correspondent Nick Assinder.

Whatever Peter Mandelson may have intended with his speech on the euro, the result has been another disaster for Tony Blair.

Just as the Conservatives appear to be making something approaching a genuine recovery, the Northern Ireland secretary has prized open the deepest rifts at the heart of the government.

He has put Tony Blair's policy on the single currency back under the spotlight at a time when the government has desperately been trying not to talk about it.

He has highlighted the deep divisions between senior ministers over the issue.

Gordon Brown: keeping quiet on the euro

And he has reminded voters that, despite their much-publicised reconciliation, he and Chancellor Gordon Brown are still at each others' throats.

On top of it all, he overshadowed the prime minister's own speech on the economy to the CBI.

Keeping quiet

The Tories' disastrous 1997 general election defeat was largely due to the party's internal wrangling over Europe. Now Mr Mandelson's comments have reminded voters that Labour is as fundamentally split on the issue as the Opposition.

The difference is that the government has been extremely disciplined and ministers have been keeping their mouths shut. Until now.

It is claimed Mr Mandelson did not clear his speech with Downing Street before delivering it.

That is extraordinary enough in a government that - partly thanks to Mr Mandelson's influence - is obsessed with control and demands that all speeches are cleared beforehand.

But he also apparently failed to tip off the chancellor that he was about to blow away his carefully crafted policy on the euro.

What Mr Mandelson said was that until the UK joins the single currency there is nothing anyone can do to help exporters suffering from the strong pound.

He is a well-known advocate of Britain's early entry into the euro and has previously revealed his enthusiasm for it.

But while the government sticks to its official line that it will only join if it is in Britain's national interest, Mr Brown's support for early entry has dramatically cooled.

Secret plans

Mr Mandelson's remarks amounted to the strongest support from any minister yet for Britain's entry into the euro.

And it inevitably led to Opposition claims that he had revealed the prime minister's secret plans to take Britain into the currency as soon as he can get away with it.

There is one theory in Westminster that Mr Blair knew exactly what Mr Mandelson was up to and had privately endorsed the move.

The suggestion is that the prime minister does indeed want to take Britain into the euro but does not want to publicly back the notion because of the likely backlash.

He does not want to be seen as at odds with his Chancellor but would like the debate on the euro to be opened up as part of a campaign to win voters around to the idea.

Alternatively, it is claimed ministers are deliberately tailoring their message on the euro to whichever audience they are addressing in an attempt to have the best of both worlds.

If, however, Mr Mandelson did make his remarks without the knowledge or support of the prime minister, it must throw a question mark over his expected cabinet promotion.

The prime minister is said to be ready to bring him back from Belfast, assuming the peace process gets back on track, and give him a more senior post and responsibility for managing the next general election strategy.

At the moment both Mr Mandelson and Mr Brown are supposed to be in joint charge of election planning, but the latest row will put yet further strain on their relationship.

Whatever the truth about the speech, what is certain is that Mr Blair could have well done without such a row just as his opinion poll rating is slipping and the next election looks like turning into a proper fight.