Charging Ahead Watch out, Washington and Moscow.

By CHRISTOPHER REDMAN PARIS

"We often hear that there is just one Europe," Lech Walesa told his hosts after arriving in West Germany last week to seek financial support for Poland's own version of perestroika. "Well, I just looked out the window from the plane, and there is in fact just one Europe." From aloft the Solidarity leader could not, of course, see the very real partition of Europe into East and West. Nor could he detect the many barriers that still separate the countries of Western Europe. But what Walesa did discern is that Europe is changing fast: ideological divisions are disappearing, borders are blurring, and the Continent is coming together in ways that are forcing the rest of the world to take notice.

In making Bonn his first capital of call since the formation of Poland's democratically elected government, Walesa was drawing attention to a dramatic geopolitical shift: Western Europe is now the brightest beacon for East bloc countries as they emerge blinking from the long shadow of Soviet suzerainty. Walesa's mission also underscored a larger truth. In ways large and small, Western Europe is becoming a player in its own right on the world stage, increasingly less reliant on the U.S. and less cowed by the Soviet Union at the same time as it evolves into a more unified community. Never again will Washington be able to take Western Europe and its allegiance for granted. "We have grown up and have stronger muscles," says Italian journalist Ludina Barzini. "It's going to be difficult for America to understand that it is not the only rich Western power anymore."

Western Europe has turned in its best economic performance in 15 years. Stock markets are at record highs, company profits are surging, and a mood of optimism prevails as the Continent's businessmen discover a dynamism that many thought had long deserted the Old World. Look at London's vast Docklands, where a reborn city with elegant housing and sleek office buildings is rising from what was once a wasteland of derelict wharves and warehouses, the relics of Britain's mighty trading empire of yesteryear. Boats rush commuters up the Thames to the City, London's financial heartland and center of the world's freewheeling foreign-exchange market.

Or consider Paris, which will soon be several driving hours closer to London as work on a tunnel under the English Channel forges ahead. The French capital is fast becoming a major diplomatic crossroads, a host to economic summits, peace negotiations on Cambodia and talks to limit the spread of chemical weapons. In Spain, which will be host to both the Summer Olympics and World's Fair in 1992, a vibrant mood of enterprise and enthusiasm mirrors the distant days of another century, when Spanish ships braved the unknown to discover new lands and Christopher Columbus reached the Americas. Even Italy is awash in cash and exuding optimism, despite creaking public services and revolving-door governments that can be in and out of office faster than it takes a letter to go from Rome to Milan. "To speak of Europhoria is right," says Foreign Minister Gianni de Michelis. "There is a change of perception, not just among governments but among the people."

What a wonderful word, Europhoria. Western Europe seems to have rediscovered the political will to advance the stalled process of economic integration and further the old dream of Continental unity. In a bold venture eyed warily by the rest of the globe, the twelve members of the European Community* have pledged to unite their markets by Dec. 31, 1992, creating the world's largest market and trading bloc. West Europeans have few illusions about their ability to create a United States of Europe. Even within individual countries, regional rivalries are still pronounced, and the Continent's cultural diversity will continue to be a barrier to political unification. Only last week the E.C. warned of "worrying delays" by member countries in implementing single-market legislation. But Project 1992 has given fresh momentum to a process that has taken Western Europe further down the road to unity than could have been imagined in the aftermath of World War II.

At the same time, East bloc decolonization appears to be in full swing, creating the conditions for a rapprochement that promises a safer, less divided Continent. The process could yet end in instability and repression, but Europeans on both sides of the ideological divide are seizing a precious opportunity to end four dangerous decades of armed confrontation. A Europe freed from the threat of military aggression would also be a Europe with resources freed to speed growth and augment its geopolitical clout. Last week both sides pursued that chance in Vienna, where negotiations for reducing conventional armed forces in Europe resumed, with both NATO and the Warsaw Pact pushing for substantial cuts in men and materiel.

Europe's new assertiveness poses a special challenge for Washington, which has long been accustomed to treating Western Europe as a junior partner, particularly when it comes to managing the global economy and East-West security. At last May's NATO summit meeting, President Bush asserted traditional U.S. leadership with his proposals for an accelerated timetable of reductions in conventional arms. But he was forced to bow to West German demands that the alliance postpone a decision on deploying a new U.S. tactical missile to modernize NATO's nuclear arsenal.

In the coming months and years Washington is likely to be confronted by European contrariness and even defiance on subjects ranging from arms control to international economic cooperation. At the summit of the seven industrialized powers in Paris this summer, the E.C. sought and secured the lead role in coordinating the West's efforts to aid Poland and Hungary. At the conventional-arms talks in Vienna, the U.S., NATO's erstwhile champion, now sits alongside other alliance members at the negotiating table. In the Middle East, France seems to be bidding to take a lead role, seeking to negotiate a cease-fire in Lebanon while a French aircraft carrier cruises offshore.

As 1992 approaches, there is fear that Western Europe will erect protectionist ramparts to shelter its rich new market. Dependent on global trade for their prosperity, most Europeans recognize the need to prevent such an outcome. But even if Western Europe remains open for business, the Continent's growing stature is bound to produce further strains in its relationship with the U.S.

As Western Europe pursues the promise of a more prosperous and safer era, the recent past seems impossibly remote. Only a few years ago, the area's decline seemed assured. Euro-Communists loomed large, Spain's infant democracy was threatened by a military coup, and terrorists operated so boldly that a former Italian Prime Minister was kidnaped and murdered. West Europeans seemed trapped in a twilight zone of economic entropy and declining international influence. After the deep OPEC-induced recession that ushered in the 1980s, millions of workers remained sidelined, victims of an affliction dubbed Eurosclerosis -- a hardening of the business arteries caused by overregulation, underinvestment and waning competitiveness.

Predictions of Western Europe's demise, however, proved to be premature. The U.S. recovery and appetite for imports helped spur the Continent's economies. But self-help played a major role as well. With one eye on the impact of the Reagan Revolution in the U.S., the area's governments reduced taxes, scissored red tape and encouraged investment. A new breed of hard-driving Euroentrepreneurs has emerged, bent not only on streamlining the Continent's industries but also on spearheading a European invasion of corporate America. Last year British raiders alone spent $32 billion on U.S. companies, compared with $12.7 billion by the Japanese.

For Eurotycoons the U.S. may be an attractive investment, but for most West Europeans home is now where it's happening. Vice President Dan Quayle's campaign claim that the U.S. "is the envy of the world" puzzled many prosperous West Europeans. Though still much admired, America, with its violent streets, racial tensions, drug addiction and homelessness, is no longer the beckoning place it once was. Says Jean Manuel Bourgois, vice president of Groupe de la Cite, France's second largest publishing house: "The magic of the American dream has gone. Today Europeans find less to envy in America."

Portuguese fishermen or Welsh hill farmers may not endorse that claim as they struggle to wrest a living from sea and soil. Like the U.S., Western Europe has its rust belt and its regions of rural poverty. Nor has Western Europe totally escaped the scourges of drugs and violence. Yet many West Europeans are not only matching Americans in material wealth, but they also believe themselves to be enjoying a better quality of life. "I don't know what America has to offer me that I haven't got already and that I would envy," says British architect Ian Grant. "There's no intellectual challenge at all. The only challenge is making money."

In full pursuit of the good life themselves, few West Europeans would second that harsh assessment. The centerpiece of the Community's comeback is the E.C. plan to put in place something that Americans take for granted: a single marketplace in which goods, services and workers can circulate freely, and where competition can reward efficient enterprise. In 1957 the E.C.'s founding treaty promised just such a common market, but although member states dismantled intra-Community tariff barriers, they retained a bewildering barrage of regulations to restrict trade and curb competition. Although Western Europe has no immediate plans to create a common currency, E.C. countries have already made significant progress toward their goal of unstitching the area's patchwork quilt of protected national markets by 1992.

If Project 1992 succeeds, Western Europe -- on paper at least -- will be an economic superpower to be reckoned with in global markets. Last year the E.C.'s output was worth some $4.7 trillion, roughly equal to that of the U.S. and greater than that of Japan and the Asian "tigers" -- Hong Kong, Singapore, South Korea and Taiwan -- combined. A unified E.C. would not only account for 37% of the world's commerce but also, with 324 million consumers, would become the largest market in the industrial world.

But economic integration is not the only force fueling the resurgence. Western Europe has recognized that the post-World War II status quo is rapidly changing in ways that require a response if its own interests are not to be . trampled upon. Warns French President Francois Mitterrand: "Only Europe can stand up to the other powers that dominate the world." For the past 30 years Western Europe has been part of a tense triangular relationship, with one corner occupied by a mighty and menacing Soviet Union, the third by a powerful protector, the U.S.

Now the sides of the triangle are buckling, freeing up Europe to pursue a more independent role. A troubled Soviet Union is pulling back its military claws and is looking to Western Europe for assistance in getting its economy in order. Mikhail Gorbachev's beguiling call for a "common European house" attracts not only West Germans yearning for their country's reunification, but many other West Europeans anxious for a new era of East-West rapprochement.

Other jolts to Western Europe have come not from its old adversary but from its prime protector. Ronald Reagan's Star Wars initiative, with its promise of a shield to shelter the U.S. from Soviet missiles, looked to West Europeans like the apotheosis of American self-interest. Then, during his 1986 meeting with Gorbachev in Reykjavik, Reagan dismayed his West European allies by coming close to trading away, without alliance consultation, the missiles that have formed the basis for NATO defensive strategy and West European security. Ultimately a reluctant Europe accepted the resulting INF agreement, but the damage was done. Says a top NATO diplomat: "West Europeans suddenly realized that U.S. and European security interests might not be identical." Now the roles are reversed, with West Germany, supported by other Continental NATO countries, pushing -- against U.S. objections -- for the elimination of Europe's arsenal of battlefield nuclear weapons whose employment would destroy the very territory NATO is pledged to defend.

Although the Soviet threat appears to be receding, fears of American waywardness and Gorbachev's political perishability are encouraging West European governments to seek new security arrangements. France and Germany have stepped up their defense links, and French forces, though still outside NATO's military structure, are working more closely with NATO commands to boost battlefield cohesion. The Western European Union, a defense grouping of most of the European members of the NATO alliance, has been reinvigorated. The unspoken objective: an insurance policy against U.S. isolationism. "We must take our own destiny increasingly into our own hands," says French Defense Minister Jean-Pierre Chevenement. "How could we imagine Europe being reduced to a Europe of merchants?"

Amid these shifting security sands, Western Europe is also seeking to adapt to a changing world economic order in which America's pre-eminence has eroded as fast as its foreign debt has grown. Project 1992 is a response both to a global economic leadership vacuum and to the growing commercial challenge posed by North America, Japan and the fast industrializing economies of Asia. The opening up of Western Europe's protected national markets will hurt inefficient firms, but the hope is that enough competitive winners will emerge to ensure that Western Europe has its champions in the 1990s and beyond. West European governments are curbing their interventionist instincts and freeing businesses to make profits. Even when a socialist government was returned to power in France last year, it conceded the benefits of free enterprise by pledging not to renationalize the enterprises that its conservative predecessors had shifted to private control.

In the strategically vital field of computers, no European firm is capable of competing with America's IBM or Japan's Fujitsu. "We know very well that European companies still are a long way away from having the critical mass necessary to stand up to the competition," concedes Gianni Agnelli, chairman of Italy's Fiat. Still, some success stories show that Western Europe has not been entirely eclipsed at the high-tech end of the market, where the battle for survival will be keenest. Airbus Industrie has emerged as Boeing's main competitor in the lucrative commercial aviation sector. While the U.S. struggles to regain momentum in its space shuttle program, Western Europe's Arianespace, the commercial arm of the 13-nation European Space Agency, has completed 33 launches and has $2.1 billion worth of contracts on its order books. On the research front, Western Europe is poised to leapfrog the U.S. in the esoteric but strategically important field of high-energy physics. Funded by 14 European countries, the European Center for Particle Physics in Switzerland has completed construction of the world's most powerful particle accelerator. Last month the $660 million 16-mile supercollider began yielding results that promise to place the new frontier of physics firmly in Western Europe.

Fearful of being frozen out of a revitalized European Community, nonmembers like Austria and Norway are considering joining the club, and even neutral Switzerland is worried about being left standing on the platform as the 1992 train pulls out of the station. East European countries are cozying up to the Community via bilateral trade and aid deals while Moscow watches with envious desire. "What is going on in Western Europe is a serious challenge for us," says Vitali Zhurkin, director of the Soviet Academy of Science's recently created Institute for Europe. "It is a positive process that shows us perestroika should be moving quicker. We too are behind."

At E.C. headquarters in Brussels, where the Community's own perestroika is being spearheaded under the watchful eye of European Commission President Jacques Delors, officials claim Project 1992 could generate up to 5 million new jobs and speed overall growth. In the short term, however, critics charge that unemployment, currently running at 9.7%, could rise to 15% or more as the economy sheds inefficient enterprises. Sir John Harvey Jones, former chairman of Britain's giant ICI conglomerate, cautions that the next decade could see half of Western Europe's factories closed. "The road from here to there is going to be a very stony one," he warns.

West European leaders are understandably nervous about the political consequences. Polls suggest that a majority of E.C. citizens support further integration, and in a recent survey carried out by the European Commission, 5 out of 8 favored creating a European Union. But once the E.C.'s perestroika gathers momentum, the Community's citizens, like their Soviet counterparts, may find there is more pain than gain in the initial stages of the process. There is also widespread concern in Western Europe that the main beneficiaries of 1992 will be large Japanese and American multinationals already geared up for Continent-wide operations. Roger Fauroux, France's Industry Minister, has issued an unapologetic call to protect such sensitive sectors as agriculture, automobiles and textiles, which together account for one-third of the E.C.'s nonservice jobs. Protectionist measures, however, would produce other ills. At a time when the U.S. needs exports to help reduce its trade deficit, higher E.C. import barriers are likely to provoke resentment and retaliation that may not be confined to the trade front. "If we create a fortress Europe," warns an E.C. diplomat in Brussels, "then we should not be surprised if the Americans say, 'Defend it yourselves.' " If that happens, Western Europe may have to stand on its own feet faster than it bargained for.

Could it do so? A few years ago, most West Europeans would have said no. Some still say the Continent cannot stand alone. But a growing number of West Europeans think otherwise. They like to quote the words of Walter Hallstein, the first President of the European Commission: "Anybody who does not believe in miracles in European affairs is no realist." The reality is that Western Europe has finally found its feet and is once more marching ahead.

FOOTNOTE: *Belgium, Britain, Denmark, France, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, West Germany.

CHART: NOT AVAILABLE

CREDIT: TIME Chart

CAPTION: GDP in trillions of dollars*

With reporting by Cathy Booth/Rome and Adam Zagorin/Brussels