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Europe Unites at a Fast Clip

Firms merge in megadeals as 1999 deadline nears for euro. Governments meet budget goals.

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It's not the United States of Europe yet - and won't be for a long time, if ever.

But the remarkable wave of corporate mergers rolling over Europe this week is a clear sign that the Continent is moving toward a single market. Just the last few days have seen the announcement of several megadeals worth a total of nearly $100 billion, which, as one analyst points out, "is greater than the gross domestic product of Portugal."

This merger wave is seen as a sign that corporate Europe is counting on the coming of the common currency, the euro. "I can't think of a single significant company in [continental] Europe or the UK not expecting the euro to start," says J. Paul Horne, chief international economist at Smith Barney in Paris.

This week, the European Commission announced that no less than 13 European Union members appear likely to qualify for the currency union as of Jan. 1, 1999. The return to office of Italian Prime Minister Romano Prodi is an indication of Italy's commitment to be in the starting lineup. Mr. Prodi had resigned last week after his Communist coalition partners balked at an austerity budget intended to help Italy qualify, but opposition dissolved amid public support for Prodi.

The merger wave is also a sign that European businesses are seeing cross-border trade barriers falling, however slowly, as market-opening mandates from Brussels are gradually put into practice. And so, to get big enough to take advantage of new opportunities and fight off ever-tougher competition, companies have been buying up domestic rivals and cross-border counterparts.

The five big deals announced Monday were:

* The Swedish bank Nordbanken's merger with Merita of Finland;

* The Anglo-Dutch publisher Reed Elsevier's merger with its longtime Dutch rival Wolters Kluwer;

* BAT Industries PLC's announced plan to sell its insurance and asset management businesses, including the Farmers Group, to Zurich Insurance Co.;

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