(FORTUNE Magazine) – FROM THE JAGGED Danish coast to Seville's sun-baked hills, Western Europe is laying a foundation of steel and concrete to support its drive for economic integration. A network of tunnels, bridges, and high-speed railroads will cut through centuries-old barriers to travel and commerce. Within ten years, managers will be able to have breakfast in London, lunch in Paris, and dinner in Barcelona -- without leaving the ground. Unlike the U.S., which hasn't built a major new railroad in decades, Europe has chosen rail as the way to go in the 21st century. The new network will stand on three legs, all megaprojects: the tunnel linking Britain and France under the English Channel, a vast new high-speed train network across continental Europe, and the bridge and tunnel that will cross the waterway known as the Great Belt between the two halves of Denmark. The latter may well become part of a larger project linking Denmark, West Germany, and Sweden. Though plagued by cost overruns, the Channel tunnel is still likely to be completed around its target date of mid-1993. At the insistence of Margaret Thatcher, Britain's free-market Prime Minister, the world's longest undersea tunnel is being built exclusively by private investors. In 1986 the British and French governments awarded responsibility for building the tunnel -- and a 55-year license to run it -- to Eurotunnel, a newly formed Anglo-French company whose shares trade on both the Paris and London stock exchanges. THE TUNNEL, which will run from near the British port city of Folkestone to the outskirts of Calais in France, will forever change travel between Britain and the Continent. It will replace high-priced air service and bumpy cross- Channel ferry trips of two hours or more. All tunnel traffic will travel by rail. Cars, trucks, and buses will drive on and off shuttle trains that will cover the 30 miles between the terminals in as little as 20 minutes. There will be ten shuttles an hour, each able to handle 150 cars or 24 trucks and buses. The shuttle trains will share the tunnel with French, British, and Belgian railways, which will carry passengers between London and the Continent on high-speed trains. The 300-mile trip from Waterloo Station in London to Gare Montparnasse in Paris will take less than three hours. Seventy feet below sea level, 11 boring machines equipped with tungsten teeth are burrowing away. The tunneling -- now about 25% complete -- is pretty much on schedule. But that hasn't kept costs from running wild. Eurotunnel's original estimate of $7.8 billion has jumped to more than $11 billion. Overly , optimistic estimates account for some of the difference. The trains alone will end up costing $1 billion, three times the initial projection. And a flurry of design changes has helped boost the cost of the terminals and rail system by $1.1 billion. Eurotunnel managers say the project is still financially sound, providing there are no more nasty surprises. The company's contingency reserves of $1.7 billion will cover part of the shortfall. Early next year, Eurotunnel intends to raise the additional $1.5 billion or more from fresh bank loans and a new stock issue. As heavy backers of the project, European banks have little choice but to go along. Investors still like Eurotunnel shares, which are now selling at a 60% premium over their offering price in late 1987. Says Richard Hannah, a security analyst with UBS Phillips & Drew in London: ''The project's return on equity will drop from 17% to 13%. But it can still be successful -- if there are no more cost overruns.'' The plan for a Pan-European network of high-speed trains was drawn by railway authorities in the 12 European Community countries as well as Austria and Switzerland. The EC is expected to endorse most of the proposal early next year. It calls for building or upgrading 11,400 miles of track by 2015 to accommodate trains running between 120 and 200 miles per hour. The estimated cost: a staggering $100 billion. Leading the railway renaissance is France's Train a Grande Vitesse (TGV). Produced by GEC Alsthom, a recently formed joint venture between electrical equipment manufacturers Cie Generale d'Electricite of France and General Electric Co. of Britain, the TGV is a technological marvel that runs on specially built tracks. Launched in 1981, the first 168-mph TGV cut the travel time between Paris and Lyons in half, to two hours. IN SEPTEMBER, France introduced a second-generation TGV, the Atlantique, which runs west from Paris to Le Mans, where it connects with an upgraded line to Brest on the Atlantic coast. Next year another line will branch off to Tours and Bordeaux. Streaking past vineyards at 186 mph, the blue-and-silver TGV Atlantique has surpassed its predecessor as the world's fastest commercial train. (Both are faster than the Japanese Bullet train, which has a top speed of 144 mph.) The TGV's success has spurred high-speed train projects all over Europe. By next summer, West Germany's answer to the TGV -- the futuristic InterCity Express trains -- will be rolling at 150 mph on newly built tracks between Wurzburg and Hanover. After a decade of dithering, Italy is finally completing a high-speed line from Rome to Florence. Most exciting are the cross-border projects in which national railways use one another's high-speed tracks, equipment, and technology. A notable example is a project that will connect five major urban areas -- London, Paris, Brussels, Amsterdam, and the Cologne-Frankfurt corridor -- with high-speed trains by 1995. The trip from London to Amsterdam via the Channel tunnel will take just over four hours, vs. ten hours today. Britain, France, and Belgium are expected shortly to place a joint $1 billion order with GEC Alsthom for 30 trains. Determined to join in, Spain is planning to spend billions to adjust the gauge of its tracks to match that of France. The first step is a high-speed line from Madrid to Seville, slated to open in time for the 1992 Seville World's Fair. Separating the two cities are the rugged Sierra Morena mountains. Today, a train between them clatters and sways for seven hours, tracing a tortuous route among the peaks. The new line tunnels straight through the mountains, cutting the journey to less than three hours. By 1995 another line from Madrid to Barcelona to the French border will move Spain a giant step closer to its northern neighbors. High-speed trains still face environmental hurdles. In theory, Europe's Greens support the trains as a tool for reducing auto emissions. Protests come mostly from purists who hate to see new lines cut through their tranquil countryside and towns. Residents of rural Kent, where Winston Churchill had his country home, are livid about a proposed high-speed line from London to the Channel tunnel. British Rail has agreed to bury nearly half the 68 miles of track, but that has tripled the estimated cost to $6 billion and will certainly delay completion to the late 1990s. THE ECONOMIC IMPACT of all these projects may be greatest in Scandinavia. For centuries Denmark has been economically divided. Half the population of five million lives on the thumb of land north of Germany composed of the Jutland peninsula and its close neighbor, the island of Fyn (see map), while the other half lives on the island of Zealand, which includes Copenhagen, 12 miles east of Fyn. Separating the two regions is the Great Belt strait, one of the main shipping routes to the Baltic. The only way to get from Jutland and Fyn to Zealand is a ferry that takes an . hour. That accounts for the huge volume of air travel between Copenhagen and Jutland, as well as the high distribution costs for companies. The $2.5 billion government-sponsored link that will unite the two regions is a piece of highly creative engineering. A low-span bridge for both car and rail traffic will run five miles from Fyn to an island in the Great Belt. From the island to Zealand, a five-mile tunnel will carry rail traffic. Cars will cross the Great Belt on a bridge high enough to allow ships to pass below. By 1993 rail passengers will make the trip in just 12 minutes. The project could be part of a grander scheme. The Danish and Swedish governments are talking about a ten-mile bridge-and-tunnel rail link from Copenhagen to the Swedish port of Malmo. West Germany and Denmark are pondering a similar tunnel connecting Zealand with the German coast near Hamburg, which could cut travel time from Malmo to Hamburg from ten hours to three. Says Eckart van Hooven, a managing director for Germany's Deutsche Bank: ''Those projects would create the new economic region of northwestern Europe.'' The goal of European integration by 1992 has no more glittering symbol than Europe's great transportation projects.