In this paper the spatial implications for Europe of major structural and institutional changes affecting the production system are examined. The concern is to establish whether these changes are enabling a greater localisation or globalisation of intrafirm and interfirm relations and, associated with this, greater scope for local economic development. The paper begins with a critical survey of an influential paradigm in which it is sustained that the transfer from Fordism to post-Fordism implies a return to regional economies. It is then argued that contemporary restructuring in Europe is very much a matter of a global extension of old and new forms of industrial organisation—a process which does not augur well for self-sustaining development at the local level. This thesis is further sustained and elaborated through a consideration, in the second half of the paper, of the implications for less-favoured regions related to the transition to market forms of spatial governance at the level of the nation-state, and, at the level of the European Community, the policy reforms connected to the completion of the Single European Market.