As Western Europe enters another year of modest economic recovery, private businesses and governments are struggling to find a way for the continent to regain a leading position in the world marketplace.
In West Germany, a series of corporate takeovers and mergers is under way that business leaders hope will make high technology as much a German strong point as the traditional Teutonic engineering.
Manufacturers such as the Netherlands' Philips and Olivetti of Italy have begun collaborative efforts with stronger U.S. companies in telecommunications. More European firms are overcoming their fears of risk-taking activities and making their first ventures into the manufacturing of advanced products such as microchips.
On the government level, France is promoting its ambitious Eureka program, designed to channel state aid to European high-technology projects. The final objective, according to French Research and Technology Minister Hubert Curien, is to "develop projects that must of necessity have an outlet meeting the needs of world or European markets."
European industrial cooperation on information technology is being promoted by the European Community's $660 million R&D program called ESPRIT.
The results of these and other efforts are not expected to be realized in the year ahead. Most forecasts show a European growth rate of 2.5 percent in 1986, an improvement over the Continent's economic standstill at the beginning of the decade, but certainly short of a major burst in growth. Unemployment, Europe's most immediate economic challenge, is expected to remain at 11 percent this year.
One of the reasons economists and industry analysts see recovery as a long-term goal is that Europe has fallen so far behind the world. From 1973 to 1984, the European Community's share of world trade dropped from 37 percent to 30 percent.
Perhaps most important, Europe's share of high-technology trade declined considerably. In telecommunications trade, Europe has less than 6 percent of the global market; in semiconductors, the share is only 8.5 percent.
While the "Europessimism" of recent years may now be out of fashion, no one is denying the difficulty of rebuilding European industries in the face of continuing challenges from traditional rivals such as the United States and Japan, as well as the newly industrialized countries.
The Paris-based Organization for Economic Cooperation and Development warned last year that "despite considerable government interest in and encouragement of high technology in Europe over the years, its trade balance appears to be on a secular downward trend."
If these trends were to continue, the OECD study said, "Europe would increasingly tend to become a net supplier to the rest of the world of food and raw materials and low-technology manufactured goods, areas where competition from non-OECD countries (and certain non-European OECD countries) can be expected to become fiercer."
An economist associated with the General Agreement on Tariffs and Trade, who asked not to be named, observed that "Europe is more specialized in markets that are growing very slowly. Europe is not present in Asia, which is booming, and has less of a presence than Japan in the United States, which is also a growth region."
Prof. Jacques Pelkmans, an economist at the European Institute of Public Administration in Maastricht, the Netherlands, said he saw a "mixed picture" for the future of Europe's global trade prospects. "The overall outlook is not bleak, but neither is it fantastic," he said.
Pelkmans said European industries needed to continue eliminating excess workers and to improve research and development, along with production capabilities, to meet consumer demands. The Dutch Phillips company developed the explosively popular compact audio disk, but Japan is now a leading supplier, because European companies cannot meet the demand, Pelkmans said.
Many analysts stress that, although there are exceptions, most EC governments are reluctant to abandon their habit of protecting national industries that are no longer competitive. There are also widespread doubts about government support of proven winners.
Juergen Donges, vice president of West Germany's Kiel Institute of World Economics, said governments, in the hope of avoiding risks, were most likely to support industrial products that have already succeeded elsewhere. "What else could a civil servant be expected to put on a list?" he said.
"I fear a kind of import substitution," Donges said, "while the Americans and the Japanese are already moving on to the next generation of these products."
Even France's Curien, while endorsing the involvement of governments in the promotion of new technology, acknowledged that "such encouragement is by no means a substitute for the determiniation of industry itself. Europe must devise a new state of mind that will incite her industrialists to talk to each other and then join forces."
There are some signs that European governments are moving away from the preservation of state monopolies in telecommunications, which have been considered the greatest barrier to competition and innovation in that field. The British government's sale of half of British Telecom last year has been seen as the most significant move, followed by the Netherlands' decision to open the supply of advanced telecommunications equipment to private companies.
There is skepticism about the utlimate usefulness to the European economy of the merger and takeover boom. But some industrial economists are encouraged by specific moves, such as the acquisition last year by Daimler-Benz, the West German car and truck manufacturer, of the Dornier aerospace group and the AEG electronics group, which is also a military contractor.
"The fact is, these companies are thinking big," said Pauline Creasey, a research fellow at the Center for European Policy Studies in Brussels.
Creasey said European companies are realizing there are technological and market gains to be made by diversifying their production activities.
The attempts at intra-European industrial collaboration have produced their own trade frictions. Airbus Industrie, the airplane maker supported financially by France, West Germany, Britain and Spain, is under attack from the Boeing company, which wants the United States to challenge the subsidies in the General Agreeent on Tariffs and Trade.
Hanging over the attempts by European companies to improve their competitive position is the lack of the real "common market" considered necessary for development of world-size industries. Barriers to trade, such as differing border taxes and national technical standards, still exist more than 25 years after the founding of the Common Market.
Removal of the barriers has been a priority of the current EC Executive Commission president, Jacques Delors. The stubbornness of the member states toward this problem, however, is revealed by their decision to set a 1992 deadline for the total elimination of the obstacles.
The community is also being challenged to bring its enormous agricultural surpluses under control. The subsidy program needed to support the surplus is widely viewed in the EC as a waste of resources that could be better used to promote industrial growth.
The farm subsidies, which along with other agricultural programs absorb more than 70 percent of the $25 billion community budget, are also a source of constant conflict with the United States and other agricultural producers, who charge that the excess supplies distort world markets.
Europe has already gone through difficult adjustment periods in two other sectors -- textiles and clothing, and steel. In both industries, the labor force has been drastically reduced, but the community continues to face pressures from its trading partners as it attempts to maintain or expand its share of the world market.
The textiles issue will be highlighted this year as preparations continue for the renegotiation of the Multi-Fiber Agreement, which expires in July. The community is seeking to hold off demands from the Third World suppliers for greater access to European markets.
Community steel makers have benefited from increased sales in the United States, due in part to the high value of the dollar and a strong demand for certain steel products. While the United States and the community were able to agree last November on a new four-year accord on most EC steel exports, they remain at odds on one category, semi-finished steel.
The pressure on the community to maintain its traditional economic sectors is underlined by the latest OECD and EC forecasts. The rate of growth in Europe in 1986 and the first half of 1987 is expected to stay close to 2.5 percent, while no change is foreseen for the current jobless rate of 11 percent -- over 19 million people. France, Italy and Spain may experience a further rise in the number of people out of work.
In its annual economic report, the EC Commission said that on the basis of "present policies and behavior, there is no prospect in the medium term of raising the community growth rate." Consequently, the group said, there is little chance that unemployment will decline significantly in this decade unless there is a distinct improvement in the relationship between growth and employment.
In its recommendations for improving this relationship, the Commission stressed the role of entrepreneurs, but also said that a proper balance between a moderation in wage increases and an adequate level of demand are necessary for a higher level of job-creating investment.
Several European countries have already made progress in containing the growth of wages, in particular through a move away from policies guaranteeing the automatic indexing of salaries to reflect inflation. The OECD report notes that, in general, "given weak labor markets and persistent weaknesses in international commodity and oil markets, the outlook for continued wage moderation is good."
The commission also underlined the link between improvements in the adaptability of labor markets and increased employment. The Netherlands, which has one of the highest EC unemployment rates, has had some success in creating jobs by reducing working hours.