Britain should keep open the possibility of eventual membership of the European single currency, according to a Labour frontbencher who says it would be "ludicrous" for the UK to cut itself off from the EU mainstream for ideological reasons.

Lord Liddle, Labour's main EU spokesman in the upper house, said it would be "pragmatic common sense" to keep membership hopes alive because the UK economy is more convergent than it has ever been with the euro area.

The intervention by Tony Blair's former Europe adviser comes on the eve of talks between Ed Miliband and Angela Merkel during the German chancellor's one-day visit to Britain on Thursday. Miliband is strongly pro-European but was a close ally of Gordon Brown, who thwarted Blair's attempts to join the euro.

Liddle told the Guardian David Cameron was wrong to rule out euro membership for ever. He said: "The attitude of mind of people that we can cut ourselves off from this is just ludicrous. We are an integral part of an integrated European economy. So, in time, if the euro sorts itself out surely the logic is: why should we hang back from that?"

Liddle was speaking to the Guardian to mark the publication of his new book – The Europe Dilemma: Britain and the Drama of EU Integration – in which he argues that Britain should never say never to the euro.

Liddle, a member Peter Mandelson's cabinet in Brussels during his time as European trade commissioner, writes: "Progressives should not accept the current conventional wisdom that Britain can never join the euro. If (and this is still uncertain) a successful 'Mark Two' euro emerges from the eurocrisis, the debate about British membership should reopen. In these circumstances, progressives should not be content with Britain's unsatisfactory status quo as a euro-out where we have little influence on many key economic decisions impacting on Britain's future."

The peer insisted he was not calling on Labour to advocate immediate British membership because he believed the euro area still had to make its banking union work and to deal with high levels of debt. Instead, he said, he was calling for Britain to keep open its options over the timeframe outlined in his book of between 10 and 20 years.

Liddle told the Guardian: "If the euro does overcome its problems it is arguable that Britain has a flexible enough economy to be able to survive within the euro's constraints. We are now more convergent with the euro area than we have ever been. One shouldn't close one's mind on ideological grounds to the possibility of joining."

In his book, which charts Britain's troubled relationship with the EU since it joined the EEC in 1973, Liddle says Labour should do more to acknowledge how enthusiastic participation in the EU could help Britain cope with what he calls the "five giants that threaten modern European civilisation". They are global competition, advances in life expectancy, migration, climate change and inequality.

Liddle told the Guardian: "What Labour has failed to do is integrate Europe into its whole thinking about what it is trying to do … Labour is defensive about Europe. The core of the case that Labour makes for our membership of the EU is made on jobs and growth. We make the case strongly. But we could do much more to demonstrate how European solutions are complementary to what we want to do at home in tackling all these challenges we face."

A Labour spokesman said: "Labour in government made the right decision not to join the euro a decade ago. It's a decision which has stood the test of time. Ed Miliband and Ed Balls have both said that joining the euro would not happen in their political lifetime. It will not happen."