France and Germany, whose political alliance was the driving force that built the European Union, may finally be poised for a return to the growth that the eurozone economy sorely needs.

Unemployment dropped last month in France, and dropped yet again in Germany for the fourth month in a row, where job vacancies are at their highest level in four years. Germany's closely-watched Ifo index of business confidence is rising faster than expected, and analysts for the Dutch Amro bank and for the U.S. Morgan Stanley group have issued reports predicting a swift takeoff in Europe's largest economy, with consumer spending and house prices finally starting to climb.

The French stock market started to take off last week, after a series of company earnings reports that far exceeded expectations. The CAC40 index of France's top companies climbed above the threshold of 2,500 points for the first time in over three years.

The Societe Generale bank recorded a 20 percent jump in profits from expanding consumer credit and a 30 percent jump in investment banking profits. Baudoin Prot, head of BNP-Paribas, said his banking group's increased profits "confirm that a strong growth dynamic is in place in all our main activities."

French banks are salivating at the prospect of the expected $50 billion privatization in October of Electricite de France, along with another $15 billion sale of the state's remaining stakes in three autoroute toll companies. France's long commitment to state ownership of strategic companies is giving way to Europe's biggest privatization program.

Shares in the giant Havas group jumped 5 percent on news that France's long advertising slump was finally over, and growth seemed to be surging in most of the main sectors at once, including the giant Suez utility conglomerate, the Total oil group and the Iliad internet service provider.

The 25 countries of the EU have a combined gross domestic product of just over $12 trillion at current exchange rates, slightly ahead of the GDP of the United States. But Germany and France, with a combined GDP of over $5 trillion between them, account for almost half of the total EU economy.

So a boom in Paris and Berlin means not only better times ahead for Europe, but that at last the United States will get some relief from its lonely role as the world's big consumer of last resort.

The most promising aspect of the Franco-German recovery is the role being played by long-delayed reforms of the rigid old labor laws. A report released last month by Morgan Stanley suggests that almost 30 percent of the German labor force now have part-time or temporary jobs, an unprecedented flexibility that helps explain why German employers have finally started to hire again.

Meanwhile in France, the government of new Prime Minister Dominique de Villepin has announced labor market reforms that for the first time will allow small business with fewer than 20 employees to sack new hires at any time during their first two years on the job, without explanation or recompense. This follows a series of surveys that said French employers dared not hire new staff because they feared they could never get rid of them again.

"The new hiring contract is a first chance for France to set in motion, from its smallest firms, the growth movement that we need," commented Laurence Parisot, the new boss of French employers' federation MEDEF, who was hired from a marketing and opinion poll group in the belief that France's employers needed a spokeswoman and symbol who could sell their pleas for reform to the French public.

"She, along with Villepin's government, faces a sharp test this September. France's labor unions are planning an autumn of protest against what the CGT union has called his "Anglo-Saxon style attack on labor rights that threaten to drive France into the raw jungle capitalism of George Bush and Tony Blair."

Villepin's government is also, like the German government, clamping down hard on what were two of the most generous welfare systems in Europe. Villepin's wants a new rule that slashes unemployment pay for anyone who does not take the first available job on offer.

In Germany, desperate to get the jobless figures down before his re-election battle next month, the government of Chancellor Gerhard Schroeder has launched pilot schemes that order the unemployed into public service and charity jobs. They get paid a symbolic one euro ($1.25) more than their unemployment pay - but get no money at all if they refuse to take the post.

These measures, revolutionary by European standards and deeply unpopular with the labor unions, reflect the sense of desperation that has built in France and Germany over the past three years of stagnation. Even some of the most cherished symbols of the old welfare state system are under attack.

In France, the 35-hour week is being whittled away by a series of reforms that reveal just how wary the government remains about launching a full-scale attack on the principle of a shorter working week.

And in Germany, the long-standing rule of "Mitbestimmung" or obligatory consultation that gives the labor unions guaranteed seats on a company's board of directors, remains despite a wave of scandals that have seen union nominees corrupted with cash, gifts, prostitutes and luxury vacations.

And even if the French and German economies are starting to grow again, other key European economies have their own problems. Britain, the EU's second biggest economy after Germany and its star economic performer for the last decade, is slowing fast as the housing bubble starts to deflate.

Retail sales in July were at their lowest for six years, suggesting that Britain's long-running consumer boom is finally ending. And Italy, Europe's fourth-largest economy, is now sunk in recession, with its economy shrinking by almost 2 percent over the past year.

But Britain is still growing, albeit less slowly than before. So the prospect of resumed growth in France and Germany, along with the robust good health of some of small and medium-sized EU economies like Spain, Finland, Ireland and Slovakia, is good news all round.

Indeed, it suggests that the global economy may soon be firing on all its four main cylinders as the United States and China continue to grow, and Japan finally starts to enjoy what seems like a steady and sustainable recovery for the first time in more than a decade.

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