The odd couple enrage the left

Blair's alliance with the Italian premier Berlusconi has led to calls for new Labour's expulsion fro

It was, as it turned out, an act of stiletto diplomacy on the part of the Prime Minister, which should have occasioned a great fuss. It went all but unnoticed in Britain. Yet in Rome, Tony Blair, with the aid of the Italian premier, Silvio Berlusconi, slipped a blade between the ribs of two great movements of the 20th century - Euro-federalism and international socialism. So far, only Italians have mourned.

Blair was returning to a British tactic that had its heyday in the 19th century: falling back on the balance of forces. This requires Britain to oppose those European powers that threaten to become overweening by allying itself with any other power, regardless of political complexion. While President Bush was proposing an "axis of evil", Blair has quietly formed an axis of convenience.

The occasion was a governmental summit in Rome on 15 February. It had at its heart an agreement between the two prime ministers - who hope to be joined by the centre-right Spanish premier Jose MarIa Aznar - on "jobs and growth in a modern economy . . . the challenge for all Europe's governments". This is a restatement, in greater detail, of commitments made two years ago at a Euro summit in Lisbon: to enhance competition, to liberalise markets (including the market for energy) and to remove barriers to employment. The employment provisions - more part-time working, more short-term contracts, more opportunities for private contractors to provide public services - are part of the fabric of life in the UK. But they are dynamite in Italy: Article 18 of the Italian statute on workers' rights gives them protection against dismissal, and both employers and the state must hold to strict agreements on hours, pay and firing policy. Berlusconi has launched an attack on this culture, claiming that it favours those in work and penalises those without. The left - sympathetic to such ideas when it was in government - now sees it as a reactionary attack on workers' rights.

But the Rome statement came with extras. The two men agreed to a common concept for the foreseeable future of a Europe of nation states, rather than a Europe preparing for transformation into a federal state. This has been a consistent British position, but it is new to Italy. Berlusconi, whose centre-right government contains leading figures who have expressed overt hostility to the European Union, has explicitly broken with almost half a century of Italian policy - which has been that Europe should evolve into being a state power in its own right. In embracing the British (and increasingly the French) position, he has isolated Germany as the only major state now explicitly committed to the federal vision - a vision for which, hitherto, Germany could always count on Italian support. He has also, deliberately, outraged the Italian left, for which federalism remains a position of faith.

It is true that Berlusconi is a politician of unformed views who shifts about radically and that, when he entertains Gerhard Schroder, the German chancellor, in Rome early in March, anything could happen. But the Italian left already sees a seismic shift. Enrico Letta, minister of industry in the former Ulivo (Olive Tree) centre-left government, said in an interview with Corriere della Sera that "with this document, Berlusconi has done nothing less than embrace the British position, which puts the nation at the centre of the European system and slows the steps towards integration . . . In order to get himself out of international isolation he has sold 50 years of Italian pro-Europeanism, breaking the former axis that represented the true motor of the Union, and with it the federalism which united us with France, Germany and the Benelux countries."

There is a deeper cause for concern - even rage - on the battered Italian left. The sight of the centre-left British Prime Minister, architect of the Third Way, sharing a platform, endorsing a document and mapping a common path on Europe with Berlusconi was sandpaper to their open wounds. To be sure, the body language on the British premier's side was quite stiff and correct, and the actual language was formal: he addressed or referred to his opposite number as "Prime Minister" or "Mr Berlusconi". But the Italian leader is as exuberant and thick-skinned a politician as you will find anywhere: he referred to "my friend Tony", embraced him, stroked his arm and - as is his trade mark - smiled, smiled, smiled.

He had much cause to smile. "Isolation" of Berlusconi was the best card the split left had. It now polls at least ten points below the right. Earlier this month, its leaders suffered a televised tongue-lashing from Nanni Moretti, the current doyen of the Italian cultural world who won the last Palme d'Or at Cannes for his film The Son's Room. At a gathering of the left in Rome's Piazza Navona, Moretti, gesturing behind him at the party leaders, shouted into the microphone: "The bureaucrats behind us have understood nothing. The Olive Tree [left coalition] must jump at least three or four generations before it can beat Berlusconi. We have come to a useless gathering."

After that hail from a man on the left of the socialist camp, a betrayal from one on its right - Tony Blair - has been too much for many. The left wing within the Democrats of the Left (Democratici di Sinistra, or DS, the former communists who were the major party in the Olive Tree coalition) now threatens to push for new Labour's expulsion from the Party of European Socialists, which brings together the left-wing parties in the European Parliament. Pietro Folena, one of the leaders of the left, called for "clarification" within the European party, saying that Blair's agreement was "incredible, a political act of the gravest sort". Cesare Salvi, a DS vice-president of the Italian Senate, said that Blair's "disquieting" role now put him, ipso facto, in the "position of the leader of the European right". His colleague Fabio Mussi, the DS vice-president of the lower chamber, said there was now "a serious fracture in European socialism".

The symbolism, in fact, has been greater than the substance. Giuliano Amato, the last prime minister of the Ulivo government, has observed that much of the Blair-Berlusconi document echoes the declarations of the Lisbon and subsequent European summits, agreed without dissent at the time by the centre left.

Yet Blair did nothing to make it easier for his Italian comrades. Asked about the effect it would have on them, he talked of the need to increase jobs as "a common thread which unites right and left in Europe" - a restatement of his belief that politics has gone beyond the old distinctions of left and right, but an idea that many on the Continental left do not wish to hear or to think about. The right, meanwhile, exults: the daily Libero, on the right of Italian politics, wrote that "the policies followed by the British Prime Minister show that there is only one way now - the liberal way".

Blair is now conducting a European policy which, as much as any other movement in Europe, is reshaping the patterns of alignments at the national and the ideological level. He has become a hyperrealist in this arena: able to make a dispassionate analysis of the strengths and weaknesses, the compatible and incompatible policies of his fellow EU members, and to use his ideological lightness of being to ally himself now with one, now with the other.

This accord between Britain, Italy and Spain is not a new "axis": the Franco-German motor is stalled, but not smashed, even if the two countries no longer seem to have the will to run it as once they did. But Blair is now able, in a year when France and Germany are both distracted by elections and (in Germany's case) economic woes, to press his case for a competitive, flexible and loosely organised Europe. He is winning adherents to his view that the biannually rotating EU presidency should be transformed into a body, with a two- or three-year life, composed of a triad of states.

This is not so much a Third Way as an amalgam of ways - a mosaic of approaches which drives wedges through many of the once- settled European relationships. With Italy and Spain, Blair can agree on flexibility; with France, on the primacy of nation statehood; with Germany, on the need to reform the Common Agricultural Policy and lower trade barriers. The colour of the government matters little to him. Nor do any scandals that might surround it, such as Berlusconi's ownership, financially or politically, of almost all the television channels in Italy. "Every country has its own laws on the media," Blair replied curtly to a question on the Italian leader's TV interests at the Rome summit press conference.

Members of the Olive Tree coalition, the first of the wave of centre-left governments to be elected in major European countries in the latter half of the 1990s, became much enamoured of the Third Way. They saw in it an ideology for the reformist Marxism that they had reformed into a nullity. But they thought of it in old terms - as an ideology that could remain as a permanent spine to their policies and actions. Blair has never seen it like that. For him, the Third Way is an approach: not a way, but a way of finding ways, which may go now left, now right. There was Thatcherism, which lasted after the lady vanished; but there is no Blairism, separate from the extraordinary political talent that is its creator, and constant re-creator.