GEORGE Osborne, the chancellor of the exchequer, has given a very important interview to the Financial Times this morning. In essence, Mr Osborne has confirmed out loud what has been visible in the shadows of policy-making for some time: Britain has reversed its previous position on the development of a two-speed Europe, with Britain in an outer circle, and an inner core of countries that use the single currency choosing much deeper fiscal integration.

Thanks to a great scoop by George Parker of the FT, it is clear the government now believes the following: (a) a big leap towards fiscal union is the only way of saving the single currency, (b) Britain has a strong interest in the survival of the single currency, (c) Britain must play no part in bailing out the single currency and will stand aloof from fiscal integration, thus (d) our national interest now lies in allowing Europe to divide into markedly different zones of integration, with us on the outside.

That prospect used to enthuse hardline Eurosceptics. It has always alarmed those (like Bagehot) who believe that on balance Britain benefits more than it loses from full membership of the European Union, thanks to the internal market and other (imperfect) spurs to free trade and free movement, but who worry that the single market will only survive if Britain is there with allies (such as the Nordic countries or the Dutch and some eastern Europeans) pulling as hard as possible on the liberal end of the rope to balance the corporatist, protectionist countries tugging on the other end.

Now, however, as could be predicted and was predicted (for example in this March 2011 column) the British government's strategy of standing back from the euro zone crisis, arms folded, has combined with the forces spinning the euro zone towards deeper integration to create a really powerful centripetal effect.

Here is the heart of the Osborne interview:

George Osborne says the “remorseless logic” of monetary union takes the single currency members in the direction of greater fiscal union, even if that did not necessarily mean having a single European budget or a single EU finance minister. “I think we have to accept that greater eurozone integration is necessary to make the single currency work and that is very much in our national interest,” he says. “We should be prepared to let that happen.” Mr Osborne admits this flies in the face of traditional British policy, which has always suspected such a union as being the precursor of an elite group of EU members, which would ultimately dictate policy to those on the outside. The chancellor seems more relaxed about that possibility, but insists that key decisions must still be taken at the level of all 27 member states, not least on matters affecting the single market.

At this point, Bagehot should put his hand up and offer an admission. For all my longstanding doubts about the wisdom of a two-speed Europe, I do not think Mr Osborne and the British government have much choice in this matter.

The FT quotes a "government official" saying that Germany simply has to step up to the plate and sort out the euro (ie, Angela Merkel has to tell her voters that they now own Greece's debts, like it or not), with the line: "the euro was their idea—they should sort it out."

Among Tory MPs and voters, you can take that sentiment and triple it, and you still don't get close to the level of hostility any British minister would face if he tried suggesting that Britain should start bailing out the euro zone alongside Germany, France and the rest. British euroscepticism has combined with recessionary politics to produce a mood so toxic that some Tory MPs can be heard questioning why Britain even belongs to the International Monetary Fund (memo to the nativists: we are an island off the shore of Europe with our own mid-sized currency and a gigantic financial sector).

So am I now in the camp of long-standing Eurosceptics cheering with joy that this crisis represents a golden opportunity for Britain?

No. I think that second-class membership is now a probable outcome of this crisis, and is probably the least bad outcome we can hope for. But it will be much less fun than the eurosceptics think.

Daniel Hannan, a prominent Tory MEP and long-time advocate of leaving the EU, writes in today's Daily Telegraph:

While some British banks are vulnerable to sovereign defaults in Europe (just as Brazilian, Canadian and Taiwanese banks are), there is no need for our taxpayers to prop up a currency that we declined to join. More than this, we ought to establish ourselves as a haven for those fleeing the uncertainty of the euro – a position which, despite our advantages of size, geography, language and global commerce, we currently cede to the Swiss. We need to withdraw from EU regulations that inhibit our recovery: burdensome employment laws, rules on mutual access to social security which inhibit welfare reform, the Common Agricultural Policy, the 48-hour week. We should, in short, aim for a form of associate membership, an amplified free trade deal as enjoyed by Norway and Switzerland. And we should make our agreement to the legal changes which the eurozone leaders want contingent on securing such a deal

This idea of Britain as a new Switzerland is a false prospectus, as it has always been. It amounts to a promise that Britain will be allowed to play free-rider on the outer shores of Europe, while less wealthy single currency members like Slovakia and Estonia pay into a euro-zone pot to bail out (among others) big British banks. It further dangles the prospect of an associate membership that would allow Britain to ditch EU labour market rules and other corporatist annoyances, and still export its goods, tariff-free, into the EU proper.

Why does anyone imagine that the euro-zone countries, who face doling out vast amounts of taxpayers' money to poorer southern fringes of the continent, would give Britain such a good deal? Eurosceptics talk of our trade deficit with the rest of Europe, and deduce from that that the EU needs us more than we need them. Well, Rhode Island runs a trade deficit with the other 49 states, but that does not allow the good people of Providence to dictate trade terms to Washington DC. The balance of power depends on the relative scale as well as the direction of trade flows.

Switzerland is much-disliked in Brussels, Paris and Berlin, and much ganged-up on. Ask the Swiss about their negotiations with the EU about bank secrecy and withholding taxes on savings accounts, and check how enjoyable those were. Ask the Swiss about the screeds of regulations written in Brussels that they have to adopt without any say. Ask the Swiss about the big sums they have to pay into the EU budget, including a special levy to help fund eastern enlargement. Ask the Swiss about the way that the EU refuses to negotiate on any individual policies, but insists that Swiss-EU relations should be on a take-it-all-or-leave-it basis.

The EU has always been a balancing act. It is a messy grand bargain between a liberal, free trading project (the bit we like) and something very different: a dream of regional chauvinism, protectionism and corporatism, underpinned by intra-EU redistribution. British membership has always involved constant tussling with countries (such as France) which traditionally placed their faith in national champions, tariff barriers and industrial policies, and which have now transferred such dreams to the European level, having concluded (with regret) that protectionism no longer works at the level of individual states.

Such countries already deeply resent Britain for the opt-outs it already has from corners of European social legislation. Mr Hannan knows Brussels and the European Parliament much too well to believe, deep down, that if we left to become a new Switzerland, they would stand by idly and let us secure fantastic competitive advantages, while still sending British-made Nissans and Toyotas into the single market, tariff-free. We would be resented, and we would be made to pay.

Does this mean that I think Mr Osborne is wrong in his assessment that Britain must accept a new status in the future Europe? No.

But I do not think it will be a happy opportunity for Britain, either, as Mr Hannan and his ilk pretend. Europe was always a mixture of good and bad ideas, of liberalism and openness and darker, more nativist forces. The forces of liberalism are in retreat, this will not end well.