The Danish people's decisive 'No' to the euro is bad news for the EU and even worse for Tony Blair. Britain's prime minister says he will hold a referendum on the single currency after the next election, provided five economic tests are met. But Thursday's result had little to do with economics and was not primarily about the euro. As the campaign for the sixth Danish referendum since 1972 made clear, it was about the political development of the European Union.

When the campaign began in March, the Danish government made the big mistake of treating membership of the euro-zone as a technical economic issue. It issued a 560-page report on the implications, but there was really not much to debate. Denmark has shadowed the D-Mark, and then the euro, for the last 18 years, so at one level the issue was little more than a change of name for the Danish currency.

But that is not how the electorate saw it. The last Danish 'No' vote - on the Maastricht treaty - had been the catalyst for some big chang es in the EU. It encouraged the eurosceptics in the UK, led to a hard-fought referendum in France and so helped to slow the integrationist tendency in Europe. The latest vote was less important since no treaty depended on it. Neverthless it, reflected a continuing unease about the political shape and development of Europe.

The lesson for Mr Blair is stark: the case for membership of the euro cannot be made only in terms of loosely drafted economic tests. There are profound political implications of a single currency that must not be fudged. It is inevitably a step towards a closer union, and he must make the case for it.

Saying 'Yes' to the euro would not entail acceptance of a federal state, government from Brussels or the end of the monarchy, as some unscrupulous 'No' campaigners suggest. But it does imply a vision of Europe bound by closer political as well as economic ties.

Making such a case will be difficult: only a quarter of UK voters think the EU is a good thing, compared with mo re than half in Denmark, according to a poll taken before Friday's result.

With output only 2 per cent of that of the euro-zone, Denmark's vote will have little economic impact on the other members, although it may help to weaken political cohesion. Britain's decision, on the other hand, will be of historic importance not only for the country but also for the future of the EU.

Britain should be in; but the Danish 'No' vote suggests that without a vigorous and imaginative campaign, the eurosceptics may win by default. Mr Blair cannot afford to dally.