It should never be forgotten, however inanely obvious, that Europe is a continent of independent states, strongly nationalistic, which have spent a good portion of the last millennium brutally ripping each other apart.

It’s quite easy to forget that the Second World War is but several generations removed, embers from which linger. Fascism in Spain survived into the 1970s. Germany is still struggling to reunite itself after a half a century of division. Only a decade ago, former Chancellor Helmut Kohl made the startling admission that Germany needs a strong integrated Europe--both economically and politically—so the horrors of the past may never be repeated. Vicious ethnic slaughter in the former Yugoslavia is a horrific reminder of past intolerance that’s still with us. And this segues right into the first new political battle of the 21^st century: ascension of neo-fascist elements into Austria's government. Concern that this could spark similar electoral response across Europe has led to the unprecedented sanction of Austria by the continent’s leaders, reflecting a latent fear about what is still clearly possible in Europe.

Toward that end, one can see the European Community, European Union, Monetary Union as more than administrative inventions seeking to promote economic growth. Anyone with even the remotest sense of history understands that these consensus-building endeavors were ultimately conceived to keep Europeans from ever again bloodying themselves by interlocking national interests.

Common currency, while sounding simple and limited in objective, is the most daring and far-reaching plan the continent has ever pursued. What Napoleon and Hitler couldn't accomplish with massive armies is what the modest little euro is ultimately after. For in reality, monetary union cannot succeed without eventually achieving a large degree of political union.

This was first evidenced when the 11 original members of monetary union decided to forfeit their own budgetary autonomy in preparing for common currency. Then, the next step witnessed the creation of the European Central Bank which, for the first time, set interest rates for 300 million Europeans.

In 1999, the euro became the underlying currency of all financial market transactions. And now we witness the introduction of euro notes and coins, and the elimination of 12 once-sovereign currencies.

At the same time, the European Union continues to push its members to deregulate their various industries--from banking to utilities to transportation. No more protecting state interests at the expense of open competition--or at least that's the goal. And while it hasn't been fully realized yet, the movement toward open markets is undeniable and inexorable.

When the German government bristled at the prospect of Vodafone buying out domestic industrial giant Mannesmann, the response had an anachronistic feel to it, a spontaneous impulse based on how things used to be. Within the context of all the market changes sweeping across the continent that’s focusing attention on quality of product and service, profitability, and shareholder value, everyone--including the Germans--knew it was the wrong way to look at the deal.

Such defensive posturing is not surprising. Traditions die hard. Never before have so many viable independent states voluntarily given up so much autonomy for a distant and uncertain greater good. And there is a deep sense of vulnerability, especially among Europe's largest players who were used to calling the shots.

At this point, it’s not likely. A gut-wrenching recession, imminent failure of core industrials, expansion of the ranks of the unemployed--ultimately, the loss of vision of where Europe under one monetary policy is going—could get such a debate started in a few countries.

But the consequence of pulling out of common currency would be tumultuous to the capital markets of any euro regime deciding to do so. Short-term interest rates would soar along with inflation, sending bond prices plummeting and virtually drying up credit. This in turn would further stifle growth. A temporary stopgap measure could then be to link the currency with another—presumably the dollar. While this strategy would stabilize markets, it then begs the question: what’s the point of getting out of the euro in the first place?

Perhaps a more likely scenario, if economic times were to become more dire, would be more akin to the American experience during the depression of the 1930s when there was never a more likely time for the country to consider an alternative system. Europeans could respond to such turmoil within the economic framework they have carefully constructed. Stringent debt limitations could be relaxed to permit governments to borrow more to assist the unemployed and to jumpstart growth. Perhaps, the Central Bank would suspend its inflation watch to reduce interest rates sufficiently to prime private investment. Or, at worst, nations could be permitted to prop up collapsing industrials with noncompetitive aid packages to ensure market stability and the preservation of jobs.

However, the one thing European officials could not count on is the crossborder migration of labor to jobs. Language barriers and strong ties to homeland and customs will limit any significant redistribution of the continent’s workforce. This, more than anything else, will undercut the potential of a unified continental economy. And it makes essential the need for governments to ultimately subjugate their immediate national interests and permit businesses to realign themselves across the continent in the most efficient means possible.

Another concern: monetary union is venturing into unexplored territory that turns conventional thinking on its head. What happens in individual economies—especially fast-growing small ones like Ireland’s—when growing inflation collides with a stimulative monetary policy aimed at triggering growth in Europe’s larger, more sluggish regions? Shareholders of local stocks beware, because just like when the Eagle was set to take off from the lunar surface some 30-odd years ago, no one is exactly sure what will happen when applying earthly laws in a strange and unknown context. Despite current inflationary difficulties, the long-term prospects for hyper-growth economies like Ireland’s are benign.

In sum, investors should not get distracted by occasional disputes between member states over open borders, free competition, or a currency that descended below parity with the dollar. The former points are natural growing pains, the latter--a blessing in disguise. Far more significant are the seismic shifts that are permanently altering the way Europeans are doing business.

The search for increased bottom-line efficiencies and shareholder value—and the simultaneous decline of state and special-interest influence over industry—will dictate the path companies from Spain to Finland, from Ireland to Greece will pursue, regardless of events affecting European union. And in the context of Europe’s remarkable wealth and untapped capacity, that’s what makes the future of Europe so compelling.