Blair remains defiant over euro

TONY BLAIR dismissed calls from pro-Europeans yesterday to "come off the fence" and launch a campaign for Britain's entry to the single currency.

After suffering a crushing defeat by the Tories in the European Parliament elections, the Prime Minister admitted he would have to learn lessons. "I understand totally the concerns people have about Europe, the frustrations about Europe," he said. Although Mr Blair insisted he would stick to his plans to call a referendum on the euro soon after the next general election, some ministers believe his caution will mean the plebiscite will have to be delayed.

William Hague, who made the single currency the central issue in the campaign, will build on his unexpected success by announcing a shake- up of the Shadow Cabinet, possibly today. In an attempt to broaden the Tories' appeal, several new faces will be promoted, while some "old guard" members of John Major's government will depart. Peter Lilley, the deputy leader, is expected to be stripped of his responsibility for party policy.

Some Labour MPs are blaming their campaigns chief, Margaret Beckett, who took a five-day holiday during the campaign, for their party's disastrous showing in the Strasbourg poll. It was claimed yesterday that the Prime Minister wants to recall Peter Mandelson to Labour's Millbank HQ to take charge of the party's campaigning machine.

Although a return to the Cabinet for the former secretary of state for trade and industry was unlikely, a role for Mr Mandelson in charge of the campaign for a second term for Labour was on offer, party sources confirmed. However, Mr Mandelson said yesterday that it would be "untimely and inappropriate" for him to return to Millbank so soon after his resignation from the Government following revelations over his pounds 373,000 home loan from the former paymaster-general, Geoffrey Robinson.

The Tories won 36 seats in the European Parliament, Labour 29, the Liberal Democrats 10, the UK Independence Party three, and the Scottish National Party, Plaid Cymru and the Greens two each. Labour's 28 per cent share of the vote was the same as it won under Michael Foot in the 1983 general election rout.

The left took a hammering across most of Europe as the centre-right became the biggest bloc in the EuropeanParliament, overtaking the Socialists for the first time in 20 years. According to latest figures, the European People's Party, the centre-right umbrella group, increased from 201 seats to 225, if places won by the Conservatives are included.

Last night Mr Hague was under pressure to sever the Conservatives' links with the EPP, which supports many federalist policies, and join other hardline parties in a new right-wing alliance.

On the back of poor performances in Germany and the UK, the Socialists dropped from 214 seats to 180, with the Liberals winning 44 seats and the Greens 37.

Labour strategists were stunned by the scale of the defeat, admitting their low-key campaign had backfired. Pro-EU ministers said privately that Mr Blair's "softly, softly" approach to Europe was "no longer tenable" after his first electoral drubbing.

Some ministers blamed the Government's cautious strategy on Gordon Brown's refusal to campaign on the euro, after he mishandled his 1997 policy statement on the issue. "He got his fingers burnt; now he won't touch it with a bargepole," said one cabinet source.

Reports and results, pages 8 & 9;

Leading article, Donald Macintyre, Review page 3