The campaign for the euro will be dealt a blow if Kenneth Clarke is elected leader of the Conservative Party, Charles Kennedy warned on Friday.

As the final votes are cast in the Tory leadership poll, Kennedy says a victory for Clarke would deprive the pro-European cause of one of its most talented performers.

In an interview with this website, Kennedy says: "Ken Clarke, whether he is leader of the Conservative Party or not, as and when there is a Euro referendum, will be a very big player in it. But he might be less of an asset to that campaign if he was leader, because he would be leading such a divided party on the issue."

Kennedy argues that Clarke will play down his pro-euro stance if he secures the top Tory job. "He'll be perpetually having to trim his public views and his language on the euro in order to placate the massive majority on his own benches who vehemently disgree with him on the issue," he argues.

With talk of defections should either Clarke or Duncan Smith win the contest, Kennedy predicts that the party will remain split whatever the outcome.

"If it's Iain Duncan Smith then clearly he will be leader of the opposition to the euro and I think again all that will do is condemn the Conservatives to be divided on the issue," he said.

He also predicts that a victory for Duncan Smith would force many moderate Tories to leave the party.

"If Iain Duncan-Smith were to win, then an awful lot of one nation moderates, pro-Europeans who've voted Conservative would re-examine their consciences," says Kennedy. "I think the sadness of this could be, if that does happen, that too many of them might be lost to active politics and community involvement altogether - and they might just walk away from the whole process."

In his exclusive interview, the Lib Dem leader also suggests that the jury is still out on whether the Lib Dems will break their formal links with Labour.

Whilst he admits a decision would be made soon he refused to be drawn on whether the Lib Dems were set to park the joint cabinet committee once and for all.

"We will clarify this [the future of the joint cabinet committee] by the time of the party conferences, and it needs to be so people know where they stand. This is only my third day back since my summer break, and the in-tray is pretty busy with things to catch up on. So that has yet to be resolved, but it could only be continued I would have thought, if there were issues of constitutional reform that the government want to place on that agenda," he said.

With Tony Blair in the chair determining whether the cabinet committee will actually discuss any real constitutional issues, Kennedy says the ball is now in the government's court.

"It is their committee at the end of the day. It's chaired by Tony Blair; it's a government committee. Now if they put up an issue of constitutional reform, I'm quite happy to sit there and have a look at it, but if they don't then obviously we will have to reconsider what we will do. But that decision has not been made," says Kennedy.

His comments come amid fresh speculation that the Lib Dems are set to go it alone. Many senior Lib Dems conceded that the party as a whole is now less keen on Lib/Lab co-operation than its previous leader, Paddy Ashdown.

Lib Dems are said to be frustrated and angered by Blair's apparant refusal to discuss major constitutional change.

Asked if he was disappointed by the lack of progress on Lords reform, Kennedy says: "Yes, and we made clear before the election that we didn't really see any way forward between the two parties on that issue because they are just simply too far apart at the moment. I was disappointed and I think they are making a mistake, but that is their decision."