CABINET ministers closed ranks around the British Chancellor, Mr Kenneth Clarke, yesterday amid claims that he was ready to quit rather than back a referendum on joining a European single currency.
A leading ally of the Chancellor hinted of a dirty tricks campaign to isolate him in the run up to crucial talks on the future of the HJ.
Rumours attributed to unnamed "friends" swept Westminster that Mr Clarke - the leading pro European in Mr Major's cabinet - was ready to resign in a bid to block moves to hold a popular vote.
Mr Clarke stayed silent, but the Treasure issued what some MPs saw as a less than convincing denial of reports on the BBC.
A spokesman said: "The Chancellor has not spoken to any journalist about this, nor have any of his friends."
The Conservative Party chairman, Dr Brian Mawhinney, is widely believed to be leading a campaign in cabinet for the government to put an end to the uncertainty over its stance on a single currency by coming down firmly in favour of a referendum.
Tory Eurosceptics claim he has the support of all but Mr Clarke and the Deputy Prime Minister, Mr Michael Heseltine, although the right wing D9fence Secretary, Mr Michael Portillo, is thought to be unconvinced.
Mr Portillo, one of the leading Eurosceptics in the cabinet yesterday rubbished the claim that Mr Clarke would resign. "The one thing I know about the Chancellor is that he needs no one to speak on his behalf and he is certainly not a quitter," he said.
"I entirely discount these stories and I think somebody is doing the Chancellor a disservice in trying to represent his views. Mr Clarke is a very strong member of our team, an extremely good Chancellor, very well respected. We are all team players and we will work this out together."
A commitment that a Tory government would enter a single currency only after holding a referendum appeared to be in prospect after the Prime Minister told MPs that ministers were "considering" the circumstances in which a poll might be appropriate.
The Foreign Secretary, Mr Malcolm Rifkind, is currently drawing up a paper setting out the pros and cons of such a move, which he will present to the cabinet in a matter of "weeks not months".
The pro European former minister, Ms Edwina Currie, said. "Kenneth Clarke is right to insist that a referendum is a thoroughly bad idea, and would he very disruptive.