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EU currency compromise reached

Details remain sketchy, but an agreement could settle a row that had threatened to badly sour relations between countries who will join the single currency in 1999 and those who will not.

Britain earlier rejected a compromise from Europe that would have allowed those not joining the single currency to attend meetings of the so-called Euro-X committee but not participate in the discussions.

Britain, which says it will not join before 2002, insisted on having a full role on the panel.

Mr Blair was unimpressed by efforts to reassure him that there was no danger of Britain being left out in the cold.

Britain fears the issue could drive a wedge in the union.

"There cannot be small clubs that try and take over the running of European Union economic policy," said Mr Blair.

"What is absolutely essential is the main decision-making body for the European Union remains the club of all 15 and, if there are important economic issues affecting the co-ordinating of economic policy in Europe, we have got to be there."

Mr Blair said there was greater support for broad participation in the Euro-X committee than many realised.

"We should understand that the vast majority of people in my view accept the British position - that the main decision-making body has got to be all the 15."

Economic exclusion is only part of the Prime Minister's concern.

Britain also worries that a Euro-inner circle will make it harder for Britain to be accepted as a top player in Europe, a key part of the Mr Blair's Labour Party's manifesto.

Before arriving in Luxembourg on Thursday night, Mr Blair telephoned five of his counterparts, including the German Chancellor, Helmut Kohl, and the French Prime Minister, Lionel Jospin, who first put forward the idea of Euro-X.

And within an hour of touching down, the Prime Minister held private talks with the Dutch, Danes and Greeks, who also will not join the single currency in the first wave.

Mr Blair was reportedly seeking support to prevent a deep split in Europe between the "ins" and "outs".

The agenda at the two-day summit also includes plans to expand the EU to include central and east European nations - with the threat of conflict over Turkey's application to join.

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