Week one of the 'Fourth Reich' – or last week of the euro?

TORY eurosceptics are privately preparing to welcome the break-up of the euro this week if Angela Merkel and Nicolas Sarkozy fail to pull off a rescue package.

The Franco-German plan for political union to make the eurozone one economic state, with one budget and effectively one Chancellor (Merkel), is already being dubbed the Fourth Reich at Westminster because it will put Germany in charge of Europe.

The Office of Budget Responsibility based its grim forecasts for lower UK growth last week on the assumption that the 17 eurozone countries would muddle through with political union agreed at the EU summit this Friday. But the OBR warned that if they failed, the outcome for Britain would be "much worse".

Senior Tory backbenchers don't agree with the OBR analysis. One Tory figure was heard gleefully telling friends that the break-up of the euro could rebuild the sick economies of Europe more quickly. "The euro could crack up by the end of the week. It's not all bad news. It could end the pain more quickly."

Ruth Lea, former policy head of the Institute of Directors, agrees. Writing for ConservativeHome, she says: "We should keep a possible collapse of the eurozone and its economic implications for Britain in perspective. The current uncertainty is undoubtedly undermining growth, it is damaging and unsustainable. And whilst the crisis goes on, confidence and growth will continue to be undermined. A resolution, one way or another, is long overdue."

She adds: "In the short-term, reconfiguration would of course be economically disruptive. But by lancing the boil and restoring certainty, confidence and growth could then be restored. The notion that a break-up of the euro would mean economic perdition and therefore 'must not be allowed to happen' is absurd."

The eurosceptics, who have formed a powerful new backbench group, the 81 group (after the number who voted against the government on the need for a UK referendum), are dismayed to hear David Cameron and George Osborne giving support to the 17 in the eurozone going for political union.

The Tory dissidents are adamant that if a treaty change is agreed at Friday's full EU crisis summit, following Merkel's talks in Paris today with Sarko, the British should be given a referendum on our new relationship with the 17 eurozone countries. The creation of 'outs' and 'ins' will radically change the single European market that Margaret Thatcher signed up to.

Nick Clegg, the deputy Prime Minister, said yesterday there would be no referendum. Speaking on the Andrew Marr Show, he said Cameron had promised a referendum only if there was a transfer of sovereignty from the UK to Europe.

But any deal done on Friday will require a new EU treaty, which means it must gain approval in all 27 Parliaments. Merkel and Sarko will have a fight on their hands at Westminster. Cameron and Clegg can also expect to be compared to Chamberlain and Halifax in 1938. ·