The Cabinet is to decide whether to hold a referendum on joining the euro before the next general election.

In the week that Clare Short accused Tony Blair of ruling by "diktat", the decision to open up the debate to the Cabinet as a whole follows weeks of deadlock between the chancellor and the prime minister over whether Britain should join.

Downing Street said yesterday that the decision on whether to hold a referendum will be revealed on June 9.

Prior to the announcement there will be full-scale Cabinet discussions, and a thorough study by senior ministers of all the Treasury's background studies and the chancellor's assessment of the five economic tests.

John Reid, the leader of the Commons and a close ally of the prime minister, welcomed the decision to involve the whole Cabinet.

"Cabinet ministers are individual human beings. They will reach their own decisions. The aggregate of their decisions will be the collective decision of the Cabinet. It will be a Cabinet decision," he said.

Meanwhile, official statistics released yesterday showed that Italy, Germany and the Netherlands all saw their economies contract in the first three months of the year. In the eurozone as a whole, growth stagnated.

In an interview with the FT, chancellor Gordon Brown hints that he will not be "bounced" into a political decision. The paper also claims that deputy prime minister John Prescott was crucial to negotiating the compromise between Brown and Blair.