UK can't hide from euro - Blair

The euro is a fact of life at London's airports

Prime Minister Tony Blair has given fresh backing to the euro - as speculation continues to grow about the timing of a possible referendum on the UK adopting the currency.

Speaking to reporters during his trip to South Asia, Mr Blair said the UK could not adopt a "head in the sand" attitude to the euro.

We have got to prepare for it, but the eventual decision is for the British people

Tony Blair

He said: "Our position on the euro hasn't changed. Of course, the euro is now a reality so I think the idea that we can run away from it or hide our heads in the sand and pretend it doesn't exist would be very foolish."

Mr Blair's comments came on the day his predecessor John Major told the BBC that he did not believe the prime minister "would risk" a referendum in the current Parliament.

Mr Blair said it offered the "potential for stability" but added: "There has to be convergence for us to make the single currency work for Britain."

He added: "We have got to prepare for it, but the eventual decision is for the British people."

'Wait and see'

Earlier on Thursday, former prime minister John Major said: "Personally I think it is very unlikely that the prime minister will risk a referendum in the next year or two."

His comments to the BBC come as former cabinet minister Peter Mandelson joined those urging Tony Blair to take the plunge and hold a vote.

I think it is quite possible that we will be in by 2012, but that is by no means certain

John Major

Mr Major, who negotiated the UK's opt-out from the single currency when prime minister, says he retained his view that "wait and see" was the best policy.

This meant that a referendum would be unlikely before 2006, pushing back the earliest date for UK membership to 2009.

Politically foolish

Mr Major told BBC Radio 4's Today programme: "I think it is quite possible that we will be in by 2012, but that is by no means certain."

As to whether now was the time to join, Mr Major said: "In my judgment it's still too early to go in. Were there to be an early referendum I for one would vote against entry. But it may be that it will be in our interest to join in due course.

"We really need to see how the euro performs through a complete economic cycle and see, crucially, the extent to which it promotes integration of other policies across Europe and whether the British are prepared to accept that degree of integration."

He described as "politically foolish" the policy of ruling out joining the eurozone for good.

Asked about the current Conservative leadership, which has a policy of ruling it out for good, Mr Major said that was a matter for them, adding: "I set out my policy before most of the current front bench were in Parliament."

Mandelson's prediction

Meanwhile former Northern Ireland secretary Peter Mandelson urged ministers to back the euro, after the smooth launch of the single currency in the 12 eurozone nations.

He predicted that Mr Blair would call a referendum on British entry before the next election, regardless of any hostile opinion polls.

Writing in the Financial Times, Mr Mandelson also predicted Chancellor Gordon Brown would not stop the prime minister going to the country over the issue if the circumstances were right.

Hain: "Euro will affect Britain"

He also praised Europe Minister Peter Hain, who suggested entry could be inevitable.

That prompted Foreign Secretary Jack Straw to damp down speculation about a referendum and the idea that British entry was inevitable.

'Sixes and sevens'

The prime minister has faced claims his authority was being undermined through the conflicting signals sent out by ministers.

Shadow chancellor Michael Howard said government policy on the single currency was "at sixes and sevens".

Mr Howard accused ministers of "playing games" on the issue, challenging them to call a referendum if they really believed entry was in Britain's interests.

Matthew Taylor MP, Liberal Democrat Treasury spokesman, added: "The longer the prime minister allows his ministers to promote conflicting messages on the euro, the more his authority will be undermined."