The results of the first round of the French presidential elections, and the likely victory of Nicolas Sarkozy in the second round, confirm that something in Europe may be changing.

About a year ago when we were working on a book about Europe, “The Future of Europe: Reform or Decline,” we were quite sure that decline, rather than pro-market reforms would be the outcome. Today, there is some hope, and the ultimate results of the French election may be the tipping point.

Indeed, the French face the choice of decline or reform. French presidential candidate Segolene Royale campaigned on a remarkably old socialist platform: more redistribution, a hike in the minimum wage, no change in the French outdated labor rules that are designed to protect the insiders and keep the young out of the labor market. This is a sure road toward politico-economic decline, but surprisingly almost all French mainstream economists, not only the Marxists, have thrown all their support behind her.

As for Mr. Sarkozy, he is no Mrs. Thatcher: when it comes to protecting farmers and preventing foreign takeovers, he is not much different from the other French politicians. But on two fronts his message sounded new.

First, he is prepared to reform labor laws in the right direction: allow firms to hire and fire freely, eliminate firing costs and an intrusive judicial intervention. At the same time, Mr. Sarkozy wants to introduce a well-functioning unemployment insurance scheme that does not discourage job search.

Second, his vision of Europe is pragmatic — the opposite of the grandiose vision of a European state with a touch of anti-Americanism so much loved in Brussels and in some European capitals such as the Prodi government in Rome. Mr. Sarkozy wants a common market in Europe, some coordination of basic policies to strengthen the common market, a monetary union, and not much else. Labor market reforms in France may bring months of social unrest and it remains to be seen if Mr. Sarkozy has the strength to face that.

The current conservative government folded up reforms as soon as a few thousand students marched the streets of Paris. But considering that Mr. Sarkozy sometimes has a difficult personality and many voters dislike him personally, the fact that he is ahead in the polls shows how much the French are worried about their future if nothing changes.

Things are also changing in Sweden, the champion of the Nordic model: competition in the markets for labor, goods, and services, and the country has one of the most efficient social safety nets in the world. Six months ago, Swedish voters replaced the Social Democrats that had been in power for over 10 years with an young, energetic prime minister, Fredrick Reinfeldt, committed to reassessing the country’s social model. While maintaining the generosity of the welfare system, he promised to eliminate distortions and further protect free markets. He wants to merge deregulation of markets, including labor markets, with a tax transfer system consistent with the Swedish predilection for low inequality, but with the least possible amount of market distortions.

In Denmark, deregulation of the labor market has made the unemployment rate even less than that of America. Some unproductive hiring in the public sector has helped, but the direction of the reform is right.

In Germany, its chancellor, Angela Merkel, despite the internal strife of her “grand coalition” has introduced a health reform which will slow down the explosion of health spending, something that America has not done yet. Even in Italy some timid steps toward more open markets, especially in services, have finally happened. Unfortunately, when it came to the sale of the Italian telecommunication giant, Telecom, state capitalism rose its ugly head, stopping foreign bidders, including AT&T, in order to protect Italian insiders.

European citizens are not ready for an anti-tax revolt, but they are increasingly more reluctant to pay high taxes if they are not accompanied by good public services. In the countries where governments are chronically unable to provide good services, taxes can only go down.

Let’s be clear: Europeans will always prefer a more generous welfare state than Americans, but perhaps they are beginning to understand two things. One is that generous social insurance can be coupled with competition in markets for goods, services, and labor. Second, you do not need to increase public spending to 50% of the gross domestic product to protect the truly poor.

Is all this enough? Certainly not. Many of the changes have happened only on the surface: the strong interest groups and the unions have not been challenged yet. But once consumers understand that things could change, it will be hard to stop change from happening. Once they realize that deregulation helps a majority at the expense of a minority of well-connected insiders, then we may see a domino effect, and reforms may acquire their own momentum and take sail.

Is this too optimistic? Perhaps, but Europe does not need any more gloom and doom. A bit of the traditional American optimism, a la Ronald Reagan and some of his policies, could do the trick.

Mr. Alesina is a professor of economics at Harvard and Mr. Giavazzi is a professor of economics at MIT.