Leading Article: After Amsterdam: playing the diversity game

There are many reasons why the Tory leadership contest has made such a compelling spectacle. One of the most satisfying is seeing the Conservatives tearing themselves apart over what is fast becoming a non- issue. The Euro-sceptics, if only they realised it, have actually won a number of important arguments; it is thanks in part to them that Tony Blair's position on Europe is now so convincing. Moreover he, and the French electorate, and Theo Waigel (would-be plunderer of the Bundesbank's glittering golden piles) have in their different ways shot the Tory Euro- sceptics' fox. After Amsterdam it is time to filch an old phrase and say we are all Euro-sceptics now. Sceptical, that is, not about the existence or utility of the European Union but about the conceits and assumptions which have guided it in recent years. The European game has moved on, and John Redwood, William Hague and the other nay-sayers have been left hors de combat.

So what, after Amsterdam, is the nature of the game? It starts to look like the re-discovery of diversity, or, to put that another way, the end of Kohlism. The propaganda picture of the German Chancellor published by the Tories during the May election campaign was not just offensive, it was plain wrong. It attributed to Helmut Kohl a desire to dominate, when instead his consuming ambition has been to create a European structure strong enough to strap the Germans in. The Kohl project was meant to lead not just to economic and monetary union, but also to closer political integration. History will surely say of that project, tinged as it has been with noble aspirations and a desperate desire to kill for ever the conditions that led to the Nazis' rampage through Europe, that it chose an odd means to realise itself; a single currency relying on deflation and mechanical delivery of the same stance on government spending and borrowing. The project, in other words, assumed its end (political co- ordination and convergence) as its means. The French election result exposed the problem, which is why the Paris newspapers are today reporting - after the botched attempt to add a jobs and social element to the fiscal stability pact - that the trans-Rhine relationship has become "fragilise".

The single currency preoccupation has had other perverse effects - unattended, that is, by Chancellor Kohl himself. Money dominated the agenda at Amsterdam, squeezing out vital questions of how the European Union is to be managed if it is to expand eastwards, as it must. Big decisions were none the less taken. To end border controls (and harmonise immigration policies) is a supreme act of trust in your neighbours, especially those with long and open coasts, such as Italy and Greece, or those with only a handful of external border guards, such as Austria. But it is on such trust that commerce and human exchange flourishes. While Tony Blair properly reflects public opinion in Britain in refusing to extend such trust on Britain's behalf, the difference of view between us and them is stark. But where British reluctance used to look like fear and loathing, now it looks either like prudence or even the sensible articulation of an alternative idea of Europe to that held by the integrationists.

To say that "stalemate" in Amsterdam in fact amounts to the beginning of a new course for Europe would be going too far. Europe faces a period of confusion, however firm the expressed commitments of Bonn and Paris to going ahead with the single currency. From Paris comes the distinct sound of whistling in the dark. Lionel Jospin has returned from Amsterdam virtually empty-handed. He either abandons firm election promises (notably that commitment to ensure Italy is in the first wave of entrants to EMU) or faces further bruising engagements with the Germans. Over the next months fiscal calculators will be much in use - to determine, for instance, whether a French budget deficit in the current financial year of 3.8 per cent followed by one of 4 per cent plus in 1998 (unless the Jospin government abandons another pledge, not to go ahead with the privatisation of France Telecom) constitutes a "tendency" away from the 3 per cent stipulated by the original Maastricht criteria.

The British government will be sorely tempted to sit out on its island and watch the sport. There is a case for creative negligence. From the foundering of the common currency project might come new thought, new remedies. Kohlism would not survive. Tony Blair ought now to be thinking beyond the British presidency of the EU next year to the German elections and the possible emergence of a new national leader there. What Britain can offer, in the meantime, is a rejection of the fatalism that pervades so much continental thinking about the EU. The failure of the common currency would not necessarily mean the end of the road for monetary integration. It would remain a logical consequence of commercial integration. But above all, the Blair government can offer its success - showing the Italians, the French and the Germans that national reforms within a European framework can reduce joblessness, enhance growth and foster trade on the basis of stable exchange rates. Such success does not come easy: Gordon Brown's problems with the sterling exchange rate are probably only just beginning. Call it a pro-European version of splendid separateness, or call it sceptical realism - after the Amsterdam summit, it starts to look like progress.