GRAHAM WATSON MEP

Quo vadis Britannia? we might well ask. For the 300th anniversary of the Act of Union threatens to open a Pandora's box. Less than four months before May's Scottish Parliament elections, the "celebrations" are fuelling a revival of nationalist sentiment on both sides of the border.

So concerned about these developments is the Labour government - whose majority relies heavily on the support of Scottish MPs - that it dispatches divisions of Ministers northwards on missions designed to revive a flagging sense of "Britishness". The latest salvo has been Gordon Brown's paean for a Union whose usefulness is increasingly questioned by the public.

Predictably, Labour unionists' efforts have met with limited success. The experience of devolution, coupled with dissatisfaction about the Blair administration, has seen a significant shift in electoral behaviour. Several recent polls have now shown a large minority of Scots, in excess of 40%, ready to back independence. One or two surveys of opinion have even detected a bare majority in favour of such a course. And one poll, for The Daily Telegraph, even showed a majority of Britons want the UK to break up.

Yet, rather than simply representing the English electorate's desire for Scots to secede from a Union in which they are no longer welcome, such statistics reflect an increasingly vocal nationalism that has gripped the UK in recent years. At 68%, the number favouring an English Parliament has reached a record high - barely two years after the north-east of England condemned regional assemblies to failure. Similarly, a staggering half of the electorate now favours a fully independent English state, divorced from Wales and Northern Ireland.

Such findings might worry the government, but they are neither the milestone nor the millstone for Westminster that they might appear. Instead, the UK's increasingly trenchant regionalism mirrors a process that has been gaining ground across Europe for quite some time.

Witness the "velvet divorce" between the Czech Republic and Slovakia in 1999. Its astounding success has left citizens in both countries satisfied and still friends. Similarly, Catalonia has gained a level of autonomy that is now almost equivalent to independence from the Spanish state, while in Germany both the powers of Lander such as Bavaria, and their demands for regional autonomy, continue to grow.

By contrast, the UK takes the largest share of central taxation of any developed country in the world. And until the 1999 devolution settlements led to the formation of the Welsh and Northern Irish assemblies and the Scottish Parliament, it was also the most politically centralised state in Europe, bar France. Seen from this perspective, the UK is just starting to catch up with a trend that is changing the way Europeans view their identity.

Indeed, as far back as the 1980s the EU had recognised the importance of resurgent regionalism, and has been actively promoting partnership with the regions - in order to federalise decision-making structures - ever since. The 1992 Maastricht Treaty paved the way for regional representation at European level through the Committee of the Regions while another grouping, known as RegLeg, has carved out a distinct role based on its members' legislative capacities.

Although worries in Paris, Rome, London and Berlin mean the EU's foot pressure on the accelerator for a new regionalism has been eased of late, that stance cannot be maintained for long. John Reid, the Home Secretary, was right when he told Labour's Scottish conference in November that, confronted with problems such as climate change and terrorism "narrow nationalism stands helpless. These challenges just can't be tackled by border guards at Gretna". However, he should allow that logic to diffuse more widely.

The deference of many of Europe's leaders to an eighteenth-century conception of the military-industrial nation state is increasingly anomalous in a climate where defence, migration management, police co-operation and economic policy are co-ordinated in Brussels.

Experience has shown that the nation state is increasingly limited in its ability to deal with the challenges of a globalised world. From world population growth and migration to climate change, internationally organised crime and terrorism, Britain can no longer succeed on its own. Increasingly, the principle of safety in numbers will demand greater co-operation through supranational institutions if governments are to provide peace, prosperity and opportunity for their citizens.

The Europe of the future will be one that encourages more sub-state participation in EU matters, both in the making of policy and its implementation. And it will be one where national parliaments no longer dominate the policy agenda. Compared with a decade ago, the EU is already far less an inscrutable international club making decisions behind closed doors, and more of a federation based on the principles of subsidiary and accountability. And the German presidency's commitment to ratifying the constitution will take that process ever further.

It is in this context that demands for self-determination from all corners of the UK should be viewed. An independent Scotland, or England for that matter, has a future firmly within a federal Europe where decisions are made at the appropriate level - whether regional, national, or supranational. Questions about whether an independent Scotland would gain automatic EU entry are overblown, whatever the Commission's representative, Neil Mitchison, may say to the contrary. Negotiations are likely to be limited to details, such as the number of MEPs Scotland would be entitled to, rather than the question of membership. And the same would apply for all nations of the Union.

However, although an independent Scotland or Wales might wish to join the euro or participate fully in the Schengen border agreements, the cost to the taxpayer of the extra layers of government necessary to achieve these goals could be huge. On economic grounds alone, there remains a strong case for the Union. But that does not have to mean the Union as we know it today.

The time has come to consider a modern settlement for the UK that reduces the centralising powers of Westminster in favour of greater co-operation between nations within the EU framework. Former First Minister Donald Dewar declared that devolution was not an event but a process. And it is a process that should develop with the demands of our times.

Independence is not the only option. We should be wary of painting the debate on Scottish secession in the simple terms of the past. Too often the choice is presented as between the status quo and independence. Yet there is another way for Scotland - one that cements its place in the EU while giving the Scottish Parliament more control over fiscal and legislative matters.

Transferring substantial revenue-raising authority to the Scottish Parliament would give future governments a free hand in developing policies to stimulate economic growth and encourage fiscal responsibility, rather than raiding the Chancellor's kitty. Similarly, devolving more powers, such as those over energy policy, to Holyrood would demand greater self-sufficiency and make the Scottish Parliament far more accountable to voters.

Whatever settlement is reached, however, one thing is clear. The Union as we know it is disintegrating and talk of retaining the status quo stale. Like all EU nations, the UK is on a one-way street towards greater regionalism, federalism and mutual co-operation. And it is in recognition of these factors that all future debate on the matter must henceforth be conducted.

Graham Watson is a LibDem Member of the European Parliament.