FOR THE FIRST time in almost a decade, I feel optimistic about the future of Europe. As I spend a long summer holiday in my house in southern France, the reason for my optimism is not the absence of bombs. Islamic fundamentalists and trigger-happy police are as much, or as little, of a threat in France as they are in Britain. It is not the weather (the skies are grey and have started to exude a British-style autumnal drizzle) or the public services (three of the last four trains I have met from Paris have arrived more than half an hour late). And it is not the food, since we do our own cooking, although this is greatly assisted by the superb range of delicacies on offer at the local Carrefour, a constant reproach to the garish monoculture of Tesco.

Why, then, do I suddenly feel good about Europe? Because Europeans seem finally to have understood that they cannot suspend the laws of economics by appealing to some kind of unique European social model. And instead of hunting for this mythical Euro-unicorn in the forests of France, Belgium and Luxembourg, intelligent Europeans are starting to look to the rest of world for ideas on improving their economic performance and their political fortunes. It is in this context, and in this context only, that Tony Blair could achieve his ambition of making “Britain a leader in Europe”. He should not even try to persuade other countries to embrace a one-size-fits-all Anglo-Saxon model. What he could very usefully do is point out the lessons of our recent experience that could help Europe to deal with the challenges it now faces.

To do this, however, we need to think much more carefully about which episodes of our recent history really could serve as useful examples.The standard answer is, of course, the Thatcher revolution: Britain’s century-long decline in the 1980s was reversed by a ruthless programme of privatisation, deregulation, tax cuts and trade union reform. This is largely true, but is there any point in campaigning for such policies in the rest of Europe?

For a start, the economic arguments for Thatcherite deregulation are by now very widely known and gain nothing from repetition ad nauseam by British politicians. More importantly, we should consider why European countries have failed to benefit from such Thatcherite policies already. Many leaders, including Silvio Berlusconi and Gerhard Schröder, have taken enormous political risks in order to push through Thatcher-style privatisations, labour-market deregulations and social security and tax reforms. Yet most of these efforts to deregulate have failed — economically, politically or both.

The reasons for these repeated failures — and why other European politicians refuse to follow the Italian and German examples after all these disappointments — become clear if we look behind the clichés about Margaret Thatcher’s unshakeable political will and her reputation as the ruthless Iron Lady.

The truth is that Britain’s labour deregulation, privatisations, tax cuts and other supply-side reforms did not, on their own, produce higher economic growth or more jobs — and they were not introduced by a maniacally ruthless leader in the teeth of public opposition. These supply-side reforms only worked economically — and only became politically feasible — because they were implemented at a time when highly expansionary monetary policies were boosting consumer spending and thereby creating jobs.

Contrary to widespread belief in Europe, Mrs Thatcher did not introduce any of the supply-side reforms for which she is now remembered in the period when she was very unpopular, during the deep recession of 1979-82. It was only from 1984 onwards, when interest rates had been halved, the pound had fallen in value by 30 per cent, the economy was growing rapidly and unemployment had stabilised, that she started introducing the revolutionary measures for which she is now justly famous.

And it was only in March 1984 that Mrs Thatcher decided to take on the miners. Three years earlier she had sensibly decided that discretion was the better part of valour and instructed the Coal Board to surrender immediately to all the miners’ demands. It was only in the autumn of 1984 that she privatised British Telecom, and it was not until March 1988 that she cut the top rate of income tax from 60 to 40 per cent. By that time, of course, Britain was in the midst of its biggest-ever consumer and housing boom, and Mrs Thatcher was wildly popular, having just won a third consecutive general election.

So to judge by the British experience, what Europe needs today is not only labour deregulation, privatisation and pension reform, which by themselves would initially depress consumer confidence, exacerbate unemployment and make governments even more unpopular and weaker than they already are. What Europe needs instead is a combination of supply-side reform with a British-style consumer, housing and mortgage boom. If such a boom were to happen across Europe — and it could easily be triggered if the European Central Bank decided to cut interest rates — supply-side reforms would become politically popular and economically quite painless. This, indeed, has been the lesson not only from Britain and America, but also from Spain and the Republic of Ireland and much of Scandinavia, which have all enjoyed very British combinations of rising house prices, soaring consumer borrowing and supply-side reforms.

What, then, is the task Mr Blair should set for the British presidency of Europe? To persuade Europe’s politicians and central bankers that the only way to become a German, French or Italian Margaret Thatcher, is to orchestrate a German, French or Italian consumer and housing boom. So Britain’s message for Europe should be simple, popular and welcome: spend more and borrow more — eat, drink and be merry.

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