Blair: I'm ready to go into euro

Tony Blair will tonight give the clearest signal yet that he is ready, willing and eager to take Britain into the euro.

And he will pave the way for a nationwide referendum this side of the next general election.

The Prime Minister confirmed that the five economic tests set by Gordon Brown must be met before the issue is put to a vote.

But once the decision has been made, he continues: "I don't think there's an issue about a gap then. Once the tests are passed, then it is in the interests of your economy so we believe you go in."

The Prime Minister, in the second of his series of three interviews with BBC's Newsnight, says he is talking about the issue with the Chancellor "the whole time".

Asked by his interviewer, Jeremy Paxman, whether the decision is getting close, he replies: "Yes it is." And he affirms that in those circumstances it would be "crazy" for Britain to stand aloof.

The strongly positive line will fuel speculation that a referendum to decide the fate of the pound could come as early as next year.

Europe minister Peter Hain recently suggested just that, only to be slapped down by the Treasury.

In tonight's recorded interview, the Prime Minister points out that the verdict on whether it is in Britain's economic interest to sign up must come no later than June next year. He continues: "Obviously, once the tests have been passed it is a live and active issue."

Mr Blair says he does not want to go down in history as the man who "surrendered the pound". But he goes on: "I would have no problem with history recording me as the person who said to the British people, 'It is in our interests for us to be a key and major player in Europe and here is something that is a single currency, in our economic interests to do so'."

The interview sees Mr Blair repeatedly fending off the charge that he is at odds with President Bush over the battle against international terrorism.

Questioned, the Prime Minister refuses no fewer than six times to endorse the president's famous description of states which sponsor terror as an "axis of evil".

Mr Blair does agree that evil is " personified" in Iraq's ruler Saddam Hussein, and that it would be better if he were toppled. But finally betraying impatience, he tells his interviewer: "You can sit here and put to me phrases that President Bush and other leaders have used all day. I choose my own phrases. I choose my own way."

The Prime Minister says he has no idea as to the whereabouts of Osama bin Laden. But he says his al Qaeda terror network has been "effectively dismantled".

In last night's Paxman interview, Mr Blair acknowledged that his Government, five years on, has still to meet many of its pledges, hopes and targets, over crime, transport and the health service. But he denied charges that he pulled the wool over the voters' eyes at the last election on the need for higher taxes. But he was repeatedly forced onto the defensive as he conceded that there was "a lot more to do" to improve Britain's rail network.

The Prime Minister also spelled out for the first time what he meant by his controversial promise earlier this month to bring London's wave of street crime "under control" by September. The target was, he said, to have the total on a "downward trend" by that date.

The Tories claimed that the Prime Minister had left his much criticised Transport Secretary, Stephen Byers, "hung out to dry" during the interview. And they asserted that Mr Byers was heading for a forced Cabinet move in a summer reshuffle.

The Prime Minister said he had "full confidence" in Mr Byers. But he repeatedly refused to confirm whether the Transport Secretary would hold onto his job.

How Paxman quizzed the PM
Bank warns on Budget inflation