Europe's economy

END-of-the-year musings about ''what might have been'' and ''what could yet be'' can be propitious - provided they are undertaken with a constructive view. That is particularly the case with nations, when aggregates of people consider how they might better their lot and become more active, useful participants in the world economic community.

We mention this because of the clear evidence of introspection and analysis now under way within the European Community, as the people and nations of that continent consider how they might bring about a much-needed economic renaissance. Such reexamination warrants praise - and the careful attention of people elsewhere.

During the past decade, Europe has increasingly lagged behind North America and Asia in job creation, technological innovation, and, perhaps most important, a sense of national or regional purpose. Reasons include the absorption of disposable income by high taxes, stringent regulation of industry and trade, and excessive spending on welfare and other government transfer programs. Unemployment, at around 18 million people on the Continent as a whole, remains a major problem and could rise to 20 million people next year, unless strong action is taken by national governments.

Clearly, Europe should seize the moment and bolster its entrepreneurial zeal. Why is that? Two reasons, both relating to the giant American economy, to which Europe is inextricably linked by trade and direct investment:

* European growth rates tend to lag behind those of the United States by anywhere from two to four quarters, according to economists. That means that the full impact of the current slowdown in the United States won't be felt in Europe - if at all - for another six months to a year. Europeans, in other words, should be using the moment to take actions to ensure continued growth.

* Four more years of the free-market-oriented Reagan administration will likely mean further deregulation of the American business community. That is expected to further job creation within the US. The upshot for Europe, however, will likely be a widening US technological lead, especially in electronics and computer industries, sectors of key importance to Europe.

Noting all this does not imply that Europe is totally dependent on what happens to the US economy. But it does recognize that a considerable part of Europe's current growth is based on exports to the US resulting from the high value of the US dollar vis-a-vis European currencies. If the dollar were to drop sharply - or were American consumers to assume a major economic slowdown was on the way - the level of European exports could drop off to the US, working against continued European recovery.

For now, Europe continues to post modest but steady economic growth in the 2 to 3 percent range. That growth rate, according to analysis by Data Resources Inc., should continue next year. West Germany, for example, is expected to show growth of around 2.4 percent next year, down only slightly from 2.8 percent this year. Italy is expected to show growth of around 2.7 percent, compared with 2.6 percent this year. France and Britain should be up slightly, Britain from 1.9 percent this year to around 2.7 percent next year; France, from 1 percent this year to around 1.5 percent next year.

In other words, Europe still has time on its side to produce necessary changes in its economy. As some European government leaders themselves are saying, the nations of Europe need to renew their commitment to creating a genuine Common Market trading community - where economies of scale can lower prices and foster competition with large American and Japanese companies. Tax rates should be lowered. Industrial deregulation is vital. Government red tape has to be curbed and joint ventures encouraged. Many sectors of Europe's economy remain strong - its nuclear, telecommunication, pharmaceutical, and airbus industries, for example. Given a heightened commitment to genuine economic reform, there is no reason why Europe cannot take full advantage of its present opportunity for growth.