"Why did the single European currency fail?" "Because the Left was in power in 1999."

It really is lousy timing. Here is a project which has far more appeal to economic liberals than to socialists. It can only hope to succeed if Europe's sclerotic labour market is liberalised. It will almost certainly sweep away the remaining national barriers in the European capital market. Big business leaders, with relatively few exceptions, like the idea, because a single currency makes life much easier for multinational accountants. Every now and then, they write fatuous letters to the Financial Times to prove it.

And which politicians are going to preside over this capitalist bean-feast? You guessed it: Europe's Social Democrats. And not just them, but also parties that are supposedly to the left of social democracy. In France we have a government that includes a number of Communists. In Italy the prime minister himself is a Communist. In Germany we have a coalition in which key ministries (including the Foreign Office) are held by Greens. And in Britain New Labour simultaneously sidles up to the Liberal Democrats (in many ways more left wing than Tony Blair on economic issues) and bickers with its own Old Labour rank and file.

Now, of course, the project of European economic and monetary union (EMU) has plenty of socialist fingerprints on it. Jacques Delors was one of the key figures responsible for shoving it to the top of the Euro agenda in the Eighties. And the present generation of leftish politicians yields to no one in its readiness to mouth pro-EMU platitudes.

But it has become increasingly clear in the past months that there is a big difference between the Left's vision of EMU and the plan agreed (by mainly right-wing governments) at Maastricht.

There is a big difference between the Left's vision of EMU and the plan agreed (by mainly right-wing governments) at Maastricht.

This is very far from being agreeable to such luminaries of the European Left as Oskar Lafontaine, the German Finance Minister and, according to yesterday's Sun, "the most dangerous man in Europe". Nor does it appeal much to Dominique Strauss-Kahn, his French counterpart.

When Europe's socialists got together in Brussels last week, they called on the ECB to aim at reducing unemployment as well as inflation when setting European interest rates. There was also considerable support - though not from Gordon Brown - for Lafontaine's proposal to "harmonise" taxes in Europe. By harmonise, of course, Lafontaine means making everyone else's taxes as high as Germany's. Incidentally, he also favours increasing German corporation taxes, already among Europe's highest.

Now, it is not wholly mad to argue that a consequence of the single currency must be a convergence of tax policies - because, in a completely integrated capital market, it will be even more tempting for investors to seek out the low-tax regions. Gradually, imperceptibly and despite the denials of disingenuous Europhiles, the European Union is evolving into a federal state; and one of the characteristics of federal states is that they tend to end up with relatively modest variations in state taxes (though seldom complete uniformity).

But where Europe's socialists have missed the point is that harmonisation (particularly for corporation tax) needs to be downward not upward; otherwise multinationals will simply relocate outside Euroland altogether.

Harmonisation - particularly for corporation tax - needs to be downward not upward.

Who taught these people economics? Could it be more staringly obvious that such a policy would syphon off money from investment, thus increasing the level of unemployment? As they say in the States: like, duh.

But there is something about all this that I really love: and that is the Left's desire to get rid of the rules about balanced budgets. This is an old, old story. After all, what are socialist governments for if not to increase public spending, and when do they ever get round to raising tax by as much? Even Mr Brown, certainly the most fiscally conservative of Europe's finance ministers, has been at it, bumping up spending in the upswing, apparently forgetting that it will go up by itself in the next downswing. No, you can bet your bottom euro: not one of these governments will run a balanced budget in 1999-2000, and the year after will be worse.

Why is this good? It is good because it is the most probable reason why EMU will fail. For, if the European governments do run deficits at the same time as the ECB pursues what will inevitably be a pretty tough monetary policy (below 2 per cent inflation is a tall order for most EMU members), two things will happen. First, the euro will appreciate against other currencies - it may well do that anyway as, on paper, it has all the hallmarks of an international reserve currency. Second, as a direct consequence, unemployment in Europe will go even higher.

Small wonder Lafontaine has also been suggesting some kind of exchange rate targeting system, to keep the euro, the dollar and the yen in synch. Predictably, the Americans do not want to know about this: even if it was in their interests, it would be very hard to make such an arrangement work. Exchange rate targets, after all, are also targets for speculators.

Not one of the governments will run a balanced budget in 1999-2000, and the year after will be worse.

What a sublime irony we are left with: that the only sort of government that could make EMU work would be a Thatcherite one - in all 11 countries.