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By Carl Bildt

Carl Bildt was prime minister of Sweden from 1991 to 1994 and is the Special Representative of U.N. Secretary General Kofi Annan to the former Yugoslavia.

STOCKHOLM -- There is a northern light shining over the gradual emergence of the new economy in Europe.

Overall, Europe is still lagging a year or two behind the United States. Productivity is not increasing as fast. The levels of entrepreneurship are lower. High-tech investments have yet to reach U.S. levels.

But there is a new determination in Europe to do better. In Lisbon last March, the leaders of the EU committed themselves to creating the most dynamic knowledge-based economy in the world within a decade. They want to overtake the United States.

If so, they have to learn from success.

Within Europe, there is no doubt that the countries in the North are doing the best. And among them, Sweden and Finland stand out as the leadership duo of the new economy in Europe.

It is not only Ericsson and Nokia, but also Internet usage, mobile-phone penetration and public awareness that make the two stand out from the rest.

Why have these two countries raced ahead?

The key lies in the early and mid-'90s, when both Sweden and Finland went through rough economic times. In Sweden the financial bubbles of the "third way'' policies of the '80s popped, and in Finland Soviet trade collapsed.

It was necessary to rethink the economic strategy from the ground up. Complacency was simply not an option.

There was also a distinct turn toward different policies. In 1992, first Sweden and then Finland decided on a liberalization of the telecom markets more radical than anything previously contemplated in Europe. One year after the advent of the digital GSM telephones (those that work on a global system for mobile communications), they created the most open and competitive market in the world for advanced communications technologies.

This was crucial for the future. Other countries deregulated slower and developed slower.

At the same time, Sweden and Finland entered the European Union. Decades of mental isolation gave way to the new possibilities of political and financial integration in Europe. And all of this coincided with them actively promoting the Internet and the new (ADD: telecommunications) revolution.

These three factors were crucial, although subsequent steps were also important. For example, there was an attempt to spread PC ownership to all.

But it was a combination of events and steps in the early and mid-'90s that made Sweden and Finland different. No other countries in Western Europe had to change as much during the 1990s. And with more open minds, they saw the new possibilities.

Together, they stand out. But there are key differences.

The tax burden of Finland is slightly above the average EU levels, while Sweden leads the world in tax burden, with 52 percent going to taxes. It is easy to see the result. The growth rate in Finland during the later part of the '90s was nearly 2 percentage points higher than in Sweden.

So the lessons for the future are clear: Create open and competitive markets; integrate over old national borders; promote the benefits of change and new technology; set up a tax system that promotes entrepreneurship; invest in education, for the future is what carries you forward.

These are the lessons of the North for those who wish a prosperous future in the new economy.

(c) 2001, Global Viewpoint. Distributed by the Los Angeles Times Syndicate International, a division of Tribune Media Services

For immediate release (Distributed 2/20/01)

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