Lord Mandelson calling for new rules to end Europe’s crisis

The former business secretary called on European leaders to devise new rules for banking, fiscal integration and structural changes for the single currency nations when they meet at the end of the month.

Lord Mandelson also warned the UK government against holding a party politically motivated “in/out” referendum on membership of the European Union (EU) but suggested a poll was a possibility “quite a way into the future”.

“What we have got to see at the end of June is a working plan,” he said. “We need to put in place a bridge to the future of the eurozone.

“Who on earth is going to rebuild their confidence in something which can’t itself see how it is going to be operating in ten years’ time?”

Lord Mandelson said Prime Minister David Cameron should not be bounced into an EU referendum.

“If and when the eurozone remakes itself and there’s a gravitational pull of decision-making within the European Union coming towards the core, then I think a question will arise once more – what’s the best relationship Britain will have with the European Union?

“It may well be, and I’m talking quite a way into the future here, that the British public want to decide that for themselves.”

Lord Mandelson said the Greek election would lead to a “very painful road back” for the failing nation regardless of the outcome.

Meanwhile, former foreign secretary David Miliband said there remained a 20-30 per cent chance of “fracture” within the eurozone but criticised the Mr Cameron for leaving Britain on the outside of talks to resolve the crisis.

“The challenge for European leaders is to make sure, as it is shifting from collective austerity that is squeezing incomes and driving down growth rates, they don’t falling into the trap of abandoning the reform that is necessary in the periphery of Europe,” he said.

“There are no guarantees. There is still a 20-30 per cent chance in my view of fracture but I think there is a very great determination in Germany and elsewhere to make sure it doesn’t happen. Organised exit is a second-best option – organised retention of Greece in the euro is the best option.

“The great danger is we are not even part of the conversation at the moment, we dealt ourselves out of the game as a result of the Prime Minister’s decision last December.

“So I think what you’re seeing in discussion, for example, of a European banking union, of 17 countries in the eurozone going ahead – Britain wouldn’t be a player, we wouldn’t be responsible for payments in that as well.

“But the logic is pointing very clearly to a eurozone that is self-governing and there is a second tier of the European Union, [in which] unfortunately Britain stands apart.”