This is clearly not the best of times for the Old World. Economic growth is stubbornly anemic, from Italy to Sweden. The euro has spent its short life sinking against the dollar--only lately coming up for air. Corporate giants that just recently were hailed as the very standard-bearers of Europe's future, such as Vodafone (VOD ), Vivendi Universal (V ), and Deutsche Telekom (DT ), are stumbling badly. Politics has gotten nasty, as more voters turn to the extreme right. And at the same moment, governments face the challenge of absorbing 10 new states into the European Union in 2004.
Against that somewhat somber backdrop, BusinessWeek correspondents and editors have chosen this year's Stars of Europe. Yes, difficulties abound, but Europe's deep ranks of talented managers, policymakers, innovators, and financiers have readily yielded worthy candidates. The winners are those whose patience and smart strategic choices really pay off in lean times.
That's the case with managers such as France's Gérard Mestrallet, who has meticulously built up Paris-based Suez (SZE ) as a global water and energy powerhouse. He could easily have gotten sidetracked in the '90s by venturing into media, energy trading, and the Net--all of which were then promising fabulous gains. Yet unlike some of his flashier counterparts in corporate Europe, the press-shy Mestrallet knew how to say no and has prospered mightily as a result. It's the same story with Pasquale Pistorio, the Sicilian CEO of Franco-Italian chipmaker STMicroelectronics (STM ). By investing heavily in research and development and forging strategic partnerships with leaders in the telecom and consumer-electronics industries, Pistorio has deftly steered STMicro through bad times as well as good. "We have 14 years of building knowledge and expertise. That's why we are a leader now," he says.
An equally determined focus on performance is what makes Spain's Emilio Botín the great success story of European banking. As his top lieutenants at Madrid-based Santander Central Hispano (SBP ) will tell you, the 67-year-old Botín regularly calls management in for strategy sessions on Sundays. That drive as well as Botín's flair for picking winners--such as the Brazilian bank, Banespa, which he boldly acquired for $5 billion in late 2001--have made SCH the largest bank in Spain and Latin America in terms of assets. And it is one of Europe's most profitable.
Brash dealmaking can be important, but at the end of the day the art of European corporate success is about managing and motivating employees--and often doing it in a more multicultural, multilingual context than anywhere else. As a manager, says Ferrari CEO Luca di Montezemolo, "you have to create the conditions for people to produce their best."
It's not just managers who are inspiring change in Europe today. In Germany, a Bundestag member of Turkish origin, Cem Ozdemir, is forcing Germans to reassess the way they treat racial and religious minorities. Denmark's controversial Bjorn Lomborg has been challenging powerful environmentalist lobbies to question some of their basic assumptions. Henri Loyrette, the determined director of that grandest repository of French culture, the Louvre, is battling against the central government's stranglehold on artistic policy.
Innovation is also alive and well. How else to explain the startling success of Britain's Paul Gratton? The 42-year-old college dropout built Egg into one of Europe's most successful online banking startups. Over in France, Bernard Liautaud, CEO of management software giant Business Objects (BOBJ ), is proving that French engineering talent can come up with a winner. It is outperforming muscular rivals like the U.S.'s Oracle Corp. (ORCL ) and Germany's SAP (SAP ).
One secret of many success stories across the Continent is the way some entrepreneurs can skillfully leverage traditional European strengths in startling new ways. France's Marc Refabert, for example, has built a thriving business selling French cheeses online. And as far away as Russia, where the business climate can still be tough, entrepreneur Anatoly Karachinsky has built up a computer programming powerhouse with more than 2,000 employees writing programs for both Russian outfits and blue-chip Western companies such as Citigroup (C ). One sign of the fast-changing times in Europe: This is the first year Russians have made it on the Stars of Europe list.
The next few years are likely to test Europe as profoundly as the period right after World War II when the Continent began picking itself up from the ruins. This time the test is demographic: Some 100 million people in the former East Bloc will soon have to find their place as European Union citizens. "Our continent's unification is at hand, and we must stand to account," warns European Commission President Romano Prodi. "Enlargement demands we define more clearly what we want in a union of 25 or more states." Historic decisions must be made on whether Europe becomes a truly cohesive political unit or remains a loose coalition of countries.
Fundamental questions indeed. But the ultimate success of Europe will be determined by vibrant human capital. On that score, Europe need not worry about its future.
A number of BusinessWeek correspondents contributed to this Special Report. They are Catherine Belton, Drake Bennett, Kerry Capell, Christopher Condon, Gail Edmondson, Jack Ewing, David Fairlamb, Carol Matlack, Stanley Reed, Andy Reinhardt, Philip Schmidt, Ariane Sains, Christine Tierney, Bogdan Turek, and Christina White. Rose Brady and Michael Serrill edited the report in New York.
By John Rossant in Paris, with bureau reports