UK interests could be severely dented if closer fiscal integration saves the single currency, former EU Trade Commissioner Lord Mandelson will say.
The success of a "eurozone mark 2" rests on a "huge step" towards closer ties between member states with collective decisions taken on tax and spending, according to Lord Mandelson.
He will say fiscal integration is "the inevitable course" for the single currency in the wake of the crisis of the last two years".
It will "probably work economically", there is a question mark over whether it is "sustainable politically", Lord Mandelson will add.
Prime Minister David Cameron's decision in December to withdraw the UK from talks amongst member states seeking a new treaty, could reduce us to a "second tier" European nation, he will say.
The former Labour Northern Ireland Secretary will also claim ruling out ever joining the euro could have implications that are "far-reaching and far from Britain's interests".
However, somewhat surprisingly, he believes any UK involvement in a Europe with closer ties would require a referendum.
Lord Mandelson, now president of the pro-European think-tank, the Policy Network, will make his case during a lecture at Oxford University's Mansfield College.
He will say: "In the years to come, Britain will be faced with a recurring choice of roads to follow. The one of joining with the core and the other of permanent second tier status, life in a sort of European annexe.
"It is certainly not inconceivable, indeed I think it is likely, that Britain will find itself a decade from now the only state in the EU, certainly the only large state, outside the eurozone. Effectively, the EU will have been rebooted, with the UK on the outside. We must not delude ourselves about this."