Kosovo Hobbles The New Europe

War has come to Europe once again, transforming a year that began in triumph into one besieged by anxiety. The brutal conflict, just a day's drive from Munich or Milan, is undermining the recently launched euro, helping to drive it down toward parity with the dollar. And if it develops into a full-fledged ground war, the battle over Kosovo could cut as much as half a point off Europe's economic growth this year. Already running at an anemic 2% annual rate--half that of the U.S.--European growth can ill afford the economic undertow from Kosovo.

This unexpected turn of events reveals how much further Europe must go before it can present a strong, unified face to the world. The delicate balancing act within NATO now requires a constant weighing of national interests that belies the notion of a unified Europe. A consequence of this is that the euro's promising future as a reserve currency is undermined by something as retrograde as an ancient Balkan conflict. All of this suggests that "Europe" is still, really, in its infancy. It may take many more years, if not decades, for it to act as an independent political, military, and economic force on the global scene.

For the moment, Italy must deal with its airports filling up with military jets, not tourist-laden airliners. Italians, as well as Greeks, Germans, and others must find the money to house hundreds of thousands of refugees--and the billions that will be needed to rebuild the Balkans once the war ends. It is not something that Europeans anticipated when they began 1999 on a note of triumph.

Before it's here, it's on the Bloomberg Terminal.