In New Europe: Britain and Italy Lose Place at Table : Union: After the currency crisis, America’s most loyal allies emerge far weaker. John Major, for one, faces great political difficulties.

WASHINGTON —  Though the dust is far from settled, enough has happened in Europe in the last two weeks to make at least preliminary judgments on the state of the old Continent necessary. A new order in Western Europe is being established before our eyes. Washington needs to take notice, for friends of America, like John Major’s Britain, have seen their position in Europe much weakened.

Europe is now being organized round a core composed of France and Germany--with less important countries like the Benelux countries attached. The sheer weight of German support for the French franc when the foreign exchange dealers started to bet against it last week is testimony to the support in the German political elite for the Franco-German axis.

Granted, this partnership may not last. President Francois Mitterrand and Chancellor Helmut Kohl are old men in a hurry: Both are committed to tying their countries closer to each other, and both have reasons to fear that those who succeed them will be less enamored of the task. But for now, the Franco-German partnership is a given. Yet, around this strong core extends an area of potential instability.

For no less significant than the strength of the Franco-German core is the weakness of Italy and Britain. Both countries have been traditional friends of the United States; both see continued benefit in finding a new role for the North Atlantic Treaty Organization; neither would like to see the removal of U.S. troops from the Continent--something that certainly cannot be said for the French. And both, after being forced to take their currencies out of the European Exchange Rate Mechanism in the past 10 days, are coming to terms with immense policy failures.

In the Italian case, the now-abandoned link to the deutsche mark through the ERM, coupled with the process of “convergence” of European economies before monetary union could be introduced, offered a powerful external discipline on Italian politics and economics. In pursuit of currency union, the government was prepared to cut the country’s bloated budget deficit and reduce its public debt. Without the carrot of union, it is doubtful whether the Italian government--facing corruption scandals in the north and the Mafia in the south--has enough sticks to beat the economy into shape.

Still, at least there is a broad consensus in Italy that European integration is worth striving for. No such consensus exists in Britain.

In a way that continental Europeans either don’t or won’t understand, modern Britain’s relationship to the European Community is complex. Almost alone among Western European nations, Britain emerged from World War II both having avoided the horror of military occupation and with a government and state whose legitimacy was intact. At the same time, unlike any other European nation, it had--and still has--a “diaspora” of people, companies and trading partners that spanned the globe.

For Germans, building the European Community and creating an integrated Europe offered a chance to redeem themselves from the legacy of their history. By tying German destiny within a broader European one, Germans determined, in effect, to protect themselves from their own worse nature. The French, for their part, saw European unity as a way of “binding Germany in” to a unified structure--and removing its threat.

But because Britain emerged from the war relatively unscathed, it never had the bitter reasons to work for European unity present in France and Germany. Moreover--and this, too, was not true of France and Germany--the process of putting all its eggs in the European basket demanded wrenching choices of Britain. After building up a “special relationship” with the United States and other former colonies, Britain discovered, by the end of the 1950s, that its economic future demanded it bind itself closer to Europe. But in both major political parties--and in the population at large--there have always been those who resented doing so.

Major, who came into office in 1990 pledging that Britain’s place was “at the heart of Europe,” has been the most pro-European prime minister since Edward Heath. It was when Major was chancellor of the exchequer that the pound was taken into the ERM, in the hope that Britain would then import Germany’s hatred of inflation.

It turns out that, with the level of German interest rates demanded by the costs of unification, Major’s policy was unsustainable. He has been humiliated. Although he survived a vote of confidence in Parliament on Sept. 24, he is not so sure of his ground that he feels able to bring the Maastricht treaty to the House of Commons for a vote.

In the Labor Party, old schisms are reopening between those in favor of European integration and those against it; in the Conservative Party, the supporters of Margaret Thatcher, implacable foe of Maastricht and a single European currency, now have new life. It is true that, by withdrawing from the ERM and cutting interest rates, Major has been able to jump-start the British economy. The problem is that Britain has shown itself unable to sustain growth without an external bulwark against inflation--which the pound’s linkage to the deutsche mark provided. The dilemma for Britain is that any attempt to get back into the ERM would be politically divisive, while failure to re-enter the ERM raises the risk of higher inflation.

It is precisely now, when the British government looks so weak, that Washington needs it most. For, although the role of the U.S. security presence in Europe has not surfaced as an election issue, there is intense interest among policy-makers, on both sides of the Atlantic, in the future of that presence. More than any other Europeans, the British take the view that NATO has been a ringing success in guaranteeing European security, and that the sheer professionalism of NATO operations cannot be lightly discarded. Both the British and Americans fear--despite German protestations--that the new Franco-German army corps will develop as a rival to NATO, and serve as an invitation to the Americans to leave Europe. Yet as the history of the century has shown, Europe without the U.S. presence is a murderous place.

The horrible truth is: Just when Washington needs political support in Europe, the political clout of its most loyal ally has been severely diminished. In Washington last week, I said to a visiting British minister that Britain’s position on European security was “right but weak.” He miserably agreed.