Jack Straw, in his first major speech on Europe as Foreign Secretary, sidestepped the controversy over membership of the single currency yesterday amid fresh signs of Government in-fighting on the issue.

Mr Straw dodged the subject as Labour faced a new round of agonising over the merits of holding a vote on abolishing the pound within two years. The manoeuvring was sparked by a report – later fiercely denied by Downing Street and the Treasury – that Tony Blair and Gordon Brown had drawn up a timetable for joining the euro.

Mr Straw called for a drive to sell the merits of the European Union to sceptical populations at home and abroad. He warned that the EU had to "connect with its citizens", adding: "Europe has to be about more than a conversation between élites."

Mr Straw, who said he had undergone a personal "journey" towards support for Europe, devoted only 34 words of his 4,000-word speech to the subject of the single currency. Listing the EU's achievements, he said: "If the five economic tests are met and our citizens decide in a referendum that they wish to join the single currency, there would in principle be further benefits, as we have made clear."

But the impact of his speech was undermined by a report in the Financial Times that Mr Blair and Mr Brown had worked out a series of stepping-stones towards joining the single currency. It claimed that, next March or April, they were likely to judge whether Britain met the five economic tests for euro membership, with a referendum staged in autumn 2002 or spring 2003.

The Treasury denounced the report as "a complete fabrication", while a Downing Street spokesman said: "No-one with any authority here spoke to the Financial Times."

Although they put on a united front, the renewed – and apparently endless – speculation over the chances of early single-currency membership will infuriate Mr Brown. It will also fuel Treasury suspicions that the Prime Minister is trying to bounce his Chancellor on the issue while his back is turned on a trip to America.

Yesterday's report came at the end of a week underlining the impression that Labour's determination to close down debate on the topic has left a vacuum filled by hardliners on either side of the argument.