IT IS remarkable what a difference a single election can make. “The way Europe is regarded by the rest of the world has changed in a few months,” says Gérard Mestrallet, chairman of both Engie and SUEZ, two big French energy firms, and a board member at Siemens of Germany, the region’s biggest engineering firm. The arrival of Emmanuel Macron as France’s reform-minded new president—his party is set for a giant victory in parliamentary elections this week—is helping to transform attitudes from gloom to cheer.

Mr Mestrallet echoes many corporate leaders in describing “real hope and enthusiasm”, amid expectations that the new president will, within months, “de-block” the euro zone’s second-largest economy. Mr Macron will start freeing business activities, he says, first with legislative reform of a rigid labour market to simplify rules on hiring and firing, and then by cutting tax rates (the corporate kind will fall from 34.4% to 25%). Measures to boost entrepreneurship and young technology firms are also expected. This may all sound over-optimistic, but Mr Mestrallet merely captures an ebullient mood that is spreading across Europe.

In truth, business sentiment in France and elsewhere was ticking up before Mr Macron’s success. The gradual emergence of animal spirits was encouraged by an improving European economy, owing to low oil prices, supportive monetary policy and a cheap euro. Worries have eased among manufacturers that President Donald Trump would spark a trade-stifling confrontation between America and China; exports are thriving.

German firms have long benefited from a combination of a steady domestic economy and their own exporting prowess. But most of corporate Europe is enjoying similar tailwinds: the 19 economies of the euro zone in aggregate grew by an annualised rate of 2.3% in the first quarter, nearly double America’s rate. Surveys say sentiment at manufacturers in Spain and Portugal is the brightest it has been in years. Inditex, a giant Spanish producer of fast-fashion clothing, which has sales predominantly in Europe, reported booming sales and profits for the first quarter on June 14th.

Business is also reassured that Angela Merkel, Germany’s chancellor, is likely to be re-elected in the autumn. She is signalling an intent to join Mr Macron in seeking European-level reforms to spur growth. These have long been promised and not delivered upon, but could include speeding the creation of a digital single market and encouraging more cross-border mergers to create industrial and other kinds of champion. The talk in Paris is that cross-border takeovers of banks could follow—something that nationalist politicians, at least in France, previously discouraged.

Renaissance era

Xavier Niel, founder of Iliad, a big French telecoms company that is poised to expand into Italy this year or next, says that more integration is essential if European firms are to mature properly. (A recent survey of European business leaders found that 60% want “more Europe”.) Mr Niel reckons that France will emerge as a vibrant centre for tech firms—Station F, a massive incubator he is funding for 1,000 startups, opens in Paris soon. But for such companies to scale up fast, as American ones do, he says that Europe needs to “unify all fiscal rules and norms” into a true single market.

Ifo, a German think-tank, talks of a “euphoric” mood in Germany, after years of sustained economic growth. Its business-climate index has reached a peak not seen since 1991, a year after reunification. The Association of German Chambers of Commerce and Industry says its 25,000 member companies report an outlook brighter “than ever before”.

Producers of capital goods are especially hopeful of a sustained upturn. Illustrative of the rising cheer is Jungheinrich, a Hamburg-based firm with 15,000 staff that is one of Europe’s largest producers of fork-lift and other equipment. Its net sales leapt by 19% year on year in the first quarter, in part as other companies in Europe buy its machinery. Volker Hues, its chief financial officer, describes “persistent intensification of business” from clients in the food, car-making and retail industries in particular. His firm is investing 13% more this year to meet rising orders.

Adding to this sense of dynamism is a welter of M&A deals, even as activity has dried up across the Atlantic. One measure—counting announced transactions involving American and European firms in the first five months of the year—points to $172bn of transactions, an increase of over 80% on the same period in 2016. A count of all deals involving European firms, by Bloomberg, for the first quarter, suggests activity is up by 34%.

“You can feel it, smell it. It’s in the air, real excitement,” says Forrest Alogna, an American mergers lawyer in Paris describing a rush of business since Mr Macron’s victory. Deals include an attempted Italian-Spanish merger of road-toll companies, which would be the biggest takeover in Spain for a decade, and a gas-industry tie-up, worth $70bn, agreed by Praxair, of America, and Linde, of Germany.

Some of these deals reflect European firms’ weakness and relative cheapness, as well as renewed optimism. Europe’s companies have fallen behind their global peers in the past decade, leaving some vulnerable to predators. In 2007 Europe claimed 14 firms among the world’s largest 100 listed ones (by market capitalisation); today it counts only seven. A big reason for the fall is the market fragmentation that worries Mr Niel.

But buyers are also drawn to firms that offer expanding revenues, and European ones look set to profit from rising growth. In Spain a revival of car production has seen SEAT, a subsidiary of Volkswagen, turn to profit for the first time in a decade. Portuguese exporters and tourism firms report rapid growth. In France defence firms expect that talk of higher military spending in Europe, a response to anxiety over America’s support for NATO, will mean new orders.

Even in Italy, an economic laggard, manufacturers sound chipper. Alberto Bombassei of Brembo, a producer of brake systems, says his firm is doing well from rising car sales at home and also surging exports. The declining fortunes of Italy’s populist Five Star Movement, and the re-emergence of a centrist former prime minister, Matteo Renzi, could portend a more business-friendly political climate there, too (though such hopes have repeatedly been dashed before).

The real test is if firms translate their optimism into far more investment. This is needed, for example, for more of them to push on with digitalisation, where continental firms lag. A recent survey of 2,000 European firms by McKinsey, a consultancy, found that they still hoard cash against a future downturn. It estimates gross corporate savings of some €2trn ($2.2trn). Investment is only just back to the absolute levels seen before the financial crisis of 2007-08 and remains low in relative terms.

That is not because of tight credit but as a result of lingering timidity. On average, respondents plan investment increases of 6.9%, cumulatively, in the next three years. That is hardly a boom. But the consultancy received its responses before Mr Macron and other centrists in Austria and the Netherlands had won power. Reforms by these political leaders are not yet in the bag. But if European business leaders trust changes are coming, they have a simple way to respond: spend again.