The Gain After Europe's Pain

Imagine Europe's economic landscape in 2020. Its top 100 companies include high-tech giants born at the turn of the century. They hold their own in Silicon Valley and Tokyo, employing hundreds of thousands of Information Age workers in high-paying jobs. A stable euro vies with the dollar as the world's reserve currency. And unemployment has shrunk to 6%, thanks to a boom in entrepreneurial activity.

Sound good? That's the payoff for the pain that is ahead. As monetary union obliterates borders between financial markets, a bloodbath is sure to follow. Hostile takeovers and brutal rationalizations--once a rarity--will be the order of the day, indelibly changing the face of corporate Europe. The cozy familiarity of local banks and insurance companies will disappear as European powerhouses are forged. From food companies to auto makers, businesses once synonymous with a national identity will fuse and extend their reach. The change will be swift and cathartic, destroying those who can't gain global girth and generate the best returns. Uncompetitive companies that have been propped up by government subsidies will be snapped up or trampled.

That's not all. Continental governments that have struggled to keep global forces at bay will have to face the music, too. The role of the state will shrink, regulations that hinder competition will be struck down, and the importance of the entrepreneur will rise. Indeed, entrepreneurs will become Europe's new elite as the old guard implodes.

Given the Continent's traditions, it could never vote itself a Thatcher or a Reagan to legislate this change. Now, in the last years of the 20th century, economic forces will do the dirty work. European leaders should seize the opportunity to remake their social-economic model for the 21st century. A prosperous Europe is one that embraces change.

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