What's Europe's Course?

The U.S. economy is bounding forward at a speed not seen for years. The China-led Asian expansion is showing no signs of slowing down. Compare that with Europe, where the anemic 0.5% growth rate this year makes it the planetary slowpoke. Yet signs are multiplying that the European Union is starting to stir. "Don't write off Europe," says Pierre Jean Everaert, chairman of the board of Belgium's Interbrew. And he isn't: The brewing giant's new investments in places like Serbia and Germany mean Europe now accounts for more than 50% of the group's $7 billion in annual sales, up from 38% in 2000.

That cautious optimism pervaded the annual BusinessWeek European Leadership Forum held on Dec. 1 and 2 at the Four Seasons Hotel George V in the heart of Paris. More than 250 business and political leaders from across Europe and into Russia and Turkey painted a picture of a Continent grappling with tough and urgent questions about its political and economic future. Participants included such corporate luminaries as Claude Bébéar, the legendary chairman of French insurer giant AXA, Hans Verkoren of Dutch Internet banking giant ING Direct, and David Levin, CEO of London-based Symbian, the group that has created the software powering the next generation of mobile phones.

Adding a valuable political dimension to the debate were Dominique de Villepin, the suave French Foreign Minister, and his counterpart from Greece, George A. Papandreou. Their contribution to the BusinessWeek conference signals that the recent turmoil in transatlantic relations may be beginning to ease. A smoothly functioning U.S.-European relationship, says de Villepin, "is at the heart of the stability of our world today."

FUTURE HOT BUTTONS. One message was loud and clear at the BW forum, chaired by BusinessWeek European Regional Editor John Rossant: The big challenge for both the U.S. and Europe in coming years will be the relationships both forge with an increasingly assertive China and a rising high-tech India. Despite headline-grabbing trade tensions between the U.S. and the EU now and then, the $2.3 trillion transatlantic economic bond is essentially in good shape. China, though, is becoming a hot-button trade issue in the U.S., and India, which is taking many American service jobs, could be the next target. Europeans have yet to address the challenge posed by Asia, says Rossant.

Still, 2004 ought to ring in good cheer for investors. At the Forum, Morgan Stanley European investment banking head Michael Zaoui and Patrick Sayer, CEO of Paris-based investment group Eurazeo, both predicted an uptick in dealmaking next year. David Fairlamb, BusinessWeek's European economics correspondent, agrees: "The big action in Europe in 2004 is corporate restructuring, and that's good news for the economy and good news for capital markets."

And welcome news for Europe.

By Bob Dowling, Managing Editor, International

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