Tony Blair is preparing to hold a euro referendum next spring, TUC boss John Monks has predicted.

With the Budget tax rises out of the way Monks believes there are "plenty of signs around" that the prime minister is preparing for a pro-euro campaign.

"I think there are certainly plans gearing up for a campaign next year," Monks told E!Sharp magazine. "There are plenty of signs around that the government intends to have a go at the referendum in the spring."

Monks warned that sterling's rate against the euro would have to fall to a more competitive level "to create the basis for a referendum".

The final decision will be made by Blair and chancellor Gordon Brown but the process that brings the result is likely to be fractious.

Monks is warning that a decision by the two men is unlikely to be soon. "It's kept so close, it's difficult to judge what they'll do," he said.

The possibility of a spring poll appears to have grown after fears of a slump following September 11 failed to materialise.

Brown now has greater room to manoeuvre and the Treasury is currently assessing whether the UK is on track to meet his five tests for membership.

With the UK economy continuing to grow, backed by signals that manufacturing is coming out of recession, Labour insiders believe the referendum is the next logical step for Blair.

The debate was further heightened on Monday by the launch a new pamphlet from pro-euro MPs.Former defence minister Peter Kilfoyle said the issue was now purely a political decision. "It is now a matter of political will. I think the tests, however they are defined, can be met and it is a matter of what is the most judicious time to go for a referendum," he told the BBC.

The latest turn in what is now one of the longest-running issues in British politics brought calls from the Opposition for the government to stop dithering.

Liberal Democrat leader Charles Kennedy said it was time for the prime minister to come off the fence and back a pro-euro vote.

"We have called for the euro referendum to be held on June 5th next year - the exact anniversary as it happens of the pro-European victory in the 1975 referendum. That means a Bill in this year's Queen's Speech to allow the vote to take place," he told ePolitix.com

"It's high time the government showed some leadership. The prime minister's been particularly disappointing. I'd call on Tony Blair to have the courage of his convictions on the Euro if I could really be sure that he had either courage or convictions on this issue. I think John Monks is right to push for a referendum next year and I would call on the government to set a clear timetable for that referendum."