No, this has not been a banner year for Europe Inc. Economic growth in the European Union in 2003 will be lucky to clock in at 1%. In contrast, Asian economies are showing signs of recovery, despite the recent SARS panic. And in fits and starts, the U.S. is slowly climbing out of its post-dot-com bubble and post-September 11 slump. Europe alone has remained at the starting gate.
It's almost as if Europeans have been taking on too much. This past year has seen feverish preparations for the expansion of the EU to include 10 new nations in mid-2004. At the same time, the Iraq conflict sparked an unprecedented political identity crisis within Europe. Tempers flared as governments rushed to take sides in the runup to hostilities. Despite fence-mending and the unanimous adoption by European states in late June of a draft EU constitution, tensions lie just below the surface.
Yet no one should doubt the capacity for renewal of this continent of 450 million people. When the recovery comes -- there is no question of "if" -- the 25 exceptional managers, innovators, entrepreneurs, financiers, and agenda-setters chosen as this year's BusinessWeek Stars of Europe will have played a crucial part. They come from diverse cultural and political backgrounds, and all have demonstrated an ability to embrace change, to look at new ways to sort out old problems. In a real sense, they are the revolutionaries ushering in tomorrow's Europe.
That's as true in the more calcified French and German core of Europe as on the continent's more freewheeling periphery. Look at Karl-Heinz Paqué, finance minister of Germany's Saxony-Anhalt, who is cutting back the leaden hand of Big Government. Or Hubertus Schmoldt, head of the German Chemical Workers Union, who wants more labor flexibility. They are proof that new thinking is stirring in Europe's largest economy. It could mean that Chancellor Gerhard Schröder's ambitious program of economic reforms may stand a chance of being realized.
The shakeup is certainly profound at European corporations, where executive heads have been rolling at an unprecedented pace. Once-celebrated CEOs at giants such as Vivendi Universal, Bertelsmann, France Télécom, and Fiat have been replaced. In these more uncertain times, markets are giving a premium to company chiefs who can cut costs and keep a steady hand on the tiller. That's the case with 40-year-old Edouard Michelin. At the tire giant that bears his name, Michelin has been streamlining management even as he makes the family-controlled company more investor-friendly. Profit margins have soared to the top of the industry.
If there is a fresh entrepreneurial wind in Europe, it is certainly coming from the East. Until recently, the worry was that the nations of the former Soviet bloc would impose a culture of bureaucracy and inefficiency on the rest of Europe. Instead, just the opposite has happened. From the innovation-friendly Baltic states of Latvia, Lithuania, and Estonia to the Czech Republic and Poland, the east is coming to look like an economic, social, and political laboratory for the rest of Europe. One example is the way Valery Kargin and Viktor Krasovitsky have turned a modest travel agency into Latvia's largest bank in spite of severe political and financial obstacles.
And Russia is more than ever part of Europe's renewal process. After years of capital flight, inflows of private investment are exceeding outflows -- a sure sign that confidence is increasing. That's partially due to the policy verve of Deputy Economy Minister Arkady Dvorkovich, whose 13% flat tax is turning heads even beyond Russia. And a new generation of managers such as Severstal's Alexei Mordashov and Alfa Group's Mikhail Fridman is winning plaudits from the investment community.
On the political scene, Britain's Tony Blair stands out this year for his courageous and lone support of President George W. Bush on Iraq. Yet politics may be increasingly beside the point as the elements of a European rebound fall into place. Companies are lean and hungry again. New economic policies are being tested. And there has been little letup in entrepreneurial fervor. BusinessWeek's Stars are leading the effort to make Europe dynamic again.
By John Rossant, with bureau reports