The British Labour government's programme of constitutional change is still on course after the extremely narrow victory in the Welsh referendum, but Mr Tony Blair's seemingly invincible progress has certainly been shaken. From overseas the government is being watched for clues about the renewed confidence of its European policy, as it prepares to take a momentous decision on whether and when to participate in European Economic and Monetary Union. It must be taken by the end of the year, but the government will have to consider the matter deeply in the very near future. There are indications that it is willing to take a more positive attitude. The psychological transformation of Britain's relations with Europe in the few short months since Labour's victory on May 1st is an important resource for the new government. It can be seen in different ways. Last week's indications that Brussels is prepared to lift the embargo on Northern Ireland beef exports after a calm exchange of documents and unfevered negotiations are a good example. The devolution decisions in Scotland and Wales contain their own European lessons; both nations have much to gain by a closer relationship with the EU, supplementing that through London. There is a feeling in Brussels that it is possible to do business with the new Labour government and great satisfaction that so much ground is being made up after the haggling and rooted hostility that characterised the last years of Conservative rule. Projected forward, such a sea-change could have important implications for the shape of European integration. If Britain becomes a more reliable and predictable partner, neither France nor Germany is likely to want to use the flexibility provisions agreed in the Treaty of Amsterdam to anything like the same extent as appeared necessary in the last two years. Given that EMU looks more and more likely to be successfully introduced on time, it is clear that Britain has a profound interest in maximising its influence over the crucial first years when it will be designed and installed. The British EU presidency will chair the decision-making process on EMU next year and would be much less effective if the government had already decided not to participate. Other international players, first and foremost the United States government, are beginning belatedly to realise the major geopolitical consequences that will flow from the emergence of the euro as an international reserve currency to compete with the dollar.
Such political factors propel Mr Blair towards a positive decision on EMU participation and possibly towards an earlier one. It would be sweet indeed for him to have the opportunity to go into the next British election a member of or committed to joining a successfully functioning currency union, because this could split the Conservatives for a generation. But the close Welsh result must give him pause about too rushed a referendum on EMU. Economic interests, including the misalignment of the British and continental business cycles, are also grounds for caution.
But political leadership is about taking risks. Despite the close Welsh result the Blair government has accumulated immense authority which could be used to speed up a decision to join EMU that looks increasingly in Britain's interests. What it decides to do has grave consequences for this State, given the continuing interdependence between the British and Irish economies. The Government is, nonetheless, well-advised in its determination to qualify for EMU membership irrespective of Britain's hesitation. This reflects Ireland's own interest in staying at the heart of the EU during the most ambitious economic initiative it has ever taken.