Private Investor: Europe has a bright future - if it becomes Anglo-Saxon

It's enough to restore your faith in democracy. At least the French "non" and the Dutch "nee" were a refreshing change from the usual wearily familiar pattern of Britain being the only nation, with the exception of Denmark, that ever cuts up rough.

This time, though, I don't hear the usual suspects going on about how France or the Netherlands are now "isolated in Europe", even though that is what they usually say about Britain when it finds itself in similar circumstances. I remain an optimistic investor in Europe. For in the long term, Europe ought to be a winner, although some of its economies are in pretty poor shape.

About a decade ago, I became a regular investor in Foreign and Colonial's Eurotrust and built up quite a holding. Then, a few years ago, when things seemed to be turning sour, I stopped my subscription and have watched the shares droop from a high of 700p to about half that.

Recently, though, they have begun to recover, approaching £5 again, which is the break-even point for me. It's a broadly based fund, centred on western Europe, and while I wish it had a better exposure to the eastern end of the continent, I might just be prepared to put a few shares away each month again.

The reason is that I don't see how the EU can protect itself from those huge global trends that are doing so much to transform the world economy. It's not just the usual stuff about the challenge of China, India, Brazil and the other emerging markets. We can pretty much take that as read, although the pace an d pattern of those threats will be harder to predict.

The point is that even the old Soviet bloc eventually had to give up the fight against market capitalism, just as the Vietnamese and Libyans are doing now; and, one day, so will the Cubans, the Zimbabweans, the North Koreans and any other benighted nation unlucky enough to live under some variant or other of state control.

Of course, that is a caricature of where the European Union stands, and that should be why the EU will be that much more susceptible to the pressure for reform that economic failure inevitably brings in its wake. It can see Britain and the US prospering, it can see eastern Europe growing rapidly, and it will want a bit of the action.

Nothing, not the French social model, nor even the euro itself will be able to withstand the pressure to end low growth and high unemployment. That is because European nations have the great advantage of having democratic institutions and, as we saw last week, there is no escaping the verdict of the voters. If a government - Gerhard Schroder's is the most obvious - delivers nearly five million unemployed and near-permanent recession, then it is time to replace it with another. It will happen.

One way or another, Europe will come around to the Anglo-Saxon model. Already Europe's companies are telling their workers that unless they shape up, jobs will go east. Now there are few barriers to prevent investment and jobs flowing towards the east of the EU. Eventually that will lead to much more competitive and profitable firms domiciled in the west, with them even now looking to up dividends and promote shareholder value. Most high-profile are car companies Peugeot, Renault, Volkswagen and General Motors, which have bought and are building huge capacity in Poland, the Czech Republic, Slovakia and elsewhere. West Europe's workers will find better-paid, more enjoyable jobs - but only if they have flexible labour markets to generate them.

The future for Europe is brighter than it currently seems to those in the corridors of Brussels.

s.o'grady@independent.co.uk