It will be the Tories, the anti-Europeans and others who want Britain economically isolated from Europe. For them, hitching ourselves to America's wagon is the default position in every area of policy.

The reason I disagree with them, and why I speak up, is not because I am starry-eyed about Europe, or because I oppose a constructive partnership with the US. But we will be turning our backs on what has become our domestic market for goods and services. It will mean fewer foreign businesses investing here, fewer jobs being created and less trade being done with our European partners.

That's why Britain cannot afford to say "no" to the euro indefinitely. Those who will suffer most if we do are people like my constituents and others in northern England, Scotland and Wales, whose manufacturing jobs will be hardest hit if we progressively cut ourselves off from Europe's giant single market.

So, what should the cabinet do? Of course, we should eschew personalities and I regret anything I have said that contributes to the trivialisation of this serious and complex issue. But, equally, the five tests should be weighed scrupulously in terms of their economic merits, taking into account the serious long-term costs of staying out as well as the inevitable short-run risks of going in.

That is why, in effect, we should add a sixth test to the mix: the costs to the UK economy of staying out of the euro.

There is a strong political dimension to the assessment but it is not about the personalities involved. It is about Britain's long-term political influence in Europe and our ability to shape crucial decisions that affect us directly, whether we are in the euro or not. But we will suffer a damaging loss of influence if we do not signal our intention to join within a realistic time-frame. That is the task for the cabinet to address in its first collective discussion of the matter today.

My view (and I speak for no one but myself) is that the cabinet should adopt a medium-term road map which provides a target date for entry in 2007. This means shifting the nature of the debate from an uncertain "if" to a clear "when", subject to confirmation by the British people in a referendum, so that the government can start winning round public opinion.

It means focusing economic policy on whatever changes are needed to ensure successful entry at that date. For example, if the argument of the Treasury's assessment is that we need to promote a shift to long-term, fixed-rate mortgages, then the government should provide the incentives now to make sure this happens, as the Budget foreshadowed.

It means deeper engagement with our European partners, as Gordon Brown has already begun, on economic reform and reshaping the rules of the eurozone. Our partners will listen more intently because they know the government is serious about joining. And as I know from my continental visits, it is our centre-left partners, in particular, who are crying out for Britain to add its influence to the cause of reform in Europe.

The euro issue goes to the heart of the UK's national economic interest. But Britain's place in Europe is also at the heart of the left's project in this country. You can be pro-European and not of the centre-left but you cannot be of the centre-left and not committed to Britain playing its full part in Europe. It is fundamental to our ambition of creating a Britain rooted in the best of centre-left values: greater equality, solidarity and opportunity.

That's why Labour - as the party of full employment and higher living standards for working people in today's globalised economy - supports European integration and euro entry. We fought and won two general elections on that basis. Greater foreign direct investment in British manufacturing jobs entails the removal of the uncertainty and transaction costs that arise while the UK is outside the single currency. Our industrial heartlands depend on it after decades of stagnation.

The left also stands for high-quality, universal public services as the bedrock of opportunity and social justice. This means devoting a greater share of our national wealth to investment in public services over the next decade, and that itself requires us to expand the productive capacity of the UK economy. We must be the party of production as well as distribution. Early euro entry is central to this ambition because it will strengthen long-term investment, competition and productivity.

That's the big picture of the cabinet's decision. No doubt it is possible to build a favourable British consensus about Europe. But you need to advance positive arguments and we have not used the last five years sufficiently to do so.

I have total confidence in the cabinet's willingness to reach the right conclusion and I will back the outcome it reaches.

· Peter Mandelson is Labour MP for Hartlepool

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