European Union Economics V. Economic and monetary union.

MONETARY POLICY
STAILITY AN! "RO#T$ PACT
Costs and %ene&its o& t'e Monetary Union
ene&its and costs o& t'e Euro &or usinesses
Efficiency gains
Lower transaction costs
Before the euro, these exchange costs were estimated at 20 to 25 billion per year in the EU (as much as
0!" to 0#" of $%&' ( much of it incurred as companies transferred goods, people and capital around
Europe )he single currency * diminished re+enues for some types of financial and ban,ing institutions
in+ol+ed in trading currencies
Increased price transparency for consumers
-onsumers can easily compare prices across borders and find the most ad+antageous price for a product or
ser+ice ( especially in the internet era ( whether it is a pair of trousers or a high*end home cinema system
)his is because increased price transparency has the effect of increasing competition between shops and
suppliers, ,eeping downward pressure on prices in the euro area)he euro has brought inflation down to a
low and stable le+el (stable prices' .nflation fell as they started preparing for the euro and, since its
introduction, has remained around 2" in the euro area &rice stability means that ordinary citi/ens0
purchasing power and the +alue of their sa+ings are better protected, which helps ma,e the future more
certain
Cheaper funds for companies;
Efficiency gains
Lower exchange risk;
Lower and more stable interest rates and stimulating long term investments
1olatile interest rates meant unpredictable costs 2ith the euro, inflation has come down to a low and stable
le+el, which also means low and stable interest rates 3irms can borrow more and more cheaply and can
in+est more confidently in the long term 4ong*term in+estment is further encouraged by the sound and
prudent management of Economic and 5onetary Union, which builds trust in the economy of the euro area
and reduces uncertainty about the future -ompanies can in+est more in growth and new technologies rather
than sa+ing money in reser+e in case of an economic downturn $o+ernment borrowing is less expensi+e, as
interest payments on national debt are lower )he money sa+ed can therefore either be used for in+estment
in new infrastructure, or to boost research spending for 6obs and growth, or for impro+ing welfare and
pension systems, or to reduce the tax burden ( depending on a 5ember 7tate0s priorities
Increased intra-EU trade
)rade within the euro area is estimated to ha+e increased between #" and 80" since the introduction of the
single currency
Costs and c'a((en)es o& t'e Euro &or companies
EU was rather considered an I!-based problem;
Euro !echnology-related issues were comprehensive and costly" but the long term implications for
businesses are more relevant;
EU companies will be facing strong competitive pressures;
#lthough the single currency" the Euro" has been introduced" the full completion of a single market
for business is still underway;
$ince %&&&" many companies have changed their financing strategies" started to borrow more from
capital markets and used sophisticated techni'ues for reducing their financial costs(
S'ort term e&&ects o& Euro &or usinesses
)n companies
%( )perational Cost
%( Cash registers"vending machines etc( need to be changed
*( $taffs need to be trained
+( ore stock of change is needed
*( $trategic challenges
%( Competition from across the border(
*( ,roblem with pricing
E&&ects o& t'e Euro &or companies
T'e common currency*s e&&ects on accountin) systems
If one views a firm-s accounting systems in isolation" it is easy to overlook many bookkeeping and
software problems arising from the euro-s introduction( !hat is precisely what Euroland politicians
did in establishing a time corridor for transition to the new currency that extends from % .anuary %&&&
until % .anuary *//*( 0ithin this corridor" the time point to switch currencies has been left for the
enterprises do decide( 1ence" each company has the option of waiting until its management thinks it
is 2ready3 for the euro( !he politicians" though" apparently overlooked the fact that enterprises are
highly interconnected with one another rather than isolated entities(
4or instance" firms exchange goods" services" and money( 0ith the exception of cash purchases" the
transaction process under certain circumstances can last several months or years( !he process consists
of a series of successive steps from initial in'uiry to purchase order" to delivery and inspection" then
to billing and payment( If the currency changeover interferes with one of these steps" the transaction
can cease to proceed smoothly(
$uppose a supplying enterprise has denominated its bill in 5" but the buying company wants to pay
with euros( 0hat is the 2right3 amount for both firms6 #lternatively" a buying company may have to
compare its purchase order in 5 with a supplying enterprise-s bill in euros( 0hat 2right3 amount
signifies the two documents agree with one another6 $uch situations are not at all hypothetical" but
reflect everyday practice within the transition time corridor( !hey pose ma7or obstacles for many of
the automated accounting systems currently in use because not all their modules can handle
transactions in multiple currencies simultaneously(
E&&ects o& t'e Euro &or companies
T'e common currency*s e&&ects on accountin) systems
4urthermore" firms also have a close relationship with the public sector( # country-s finance ministry
in particular has a paramount interest in receiving accurate accounting information from them(
8umerous national government agencies throughout Euroland therefore have announced they will
switch to the euro at the latest date possible( In the meantime" the companies- re'uired reports and
monetary transfers to the public sector still have to be in the old currency( In 9ermany" for example"
both :*;; 19< and :%;/ #) explicitly re'uire denomination of closing balances and tax reports in
5(
Companies- payments flow to banks too( !hey convert international payment flows within Euroland
via the euro to national currencies( <y doing so" the banks serve as a bridge between the old and the
new monetary orders(
<esides the close external relations firms have with each other" the public sector" and banks" the
internal relations within individual companies comprise an additional problem area( odern
management information systems operate in real time and are highly integrated( Conse'uently" a
small change in one module can have an immediate" large impact on the entire system( 4or example"
converting standard costs from the national currency to euros immediately alters the valuation of an
enterprise-s inventories and order backlog( <ecause there are so many such interdependencies of
which to be mindful" changing all of a firm-s accounting systems to the common currency in a 2big
bang3 on a single" fixed date poses enormous risks(
)n the other hand" the fixing of rates for conversion of national currencies into euros at the beginning
of %&&= reduced the complexity of introducing the new money considerably( 8evertheless" given the
intracacy of the technical accounting and software problems involved" many companies likely will be
hard-pressed to solve them before the changeover becomes mandatory(
E&&ects o& t'e Euro &or companies
Modi&ication o& t'e &irm*s accountin) systems
odifying accounting systems to accommodate the common currency-s introduction involves
numerous tasks( !o begin with" one must identify all the accounting areas in which currency
conversion is necessary( !hese areas include account balances" open accounts" long-term delivery and
production contracts as well as foreign currency swaps" outright forwards" options" futures contracts"
interest-rate derivatives" and so forth(
8ext" one has to deal with rounding differences resulting from the currency conversion process( $uch
differences arise in part because none of the national currencies in Euroland converts evenly into
euros( oreover" every transaction involves entries in at least two different accounts( Conversion of
these split-entries- values into euros" though" does not occur collectively and simultaneously( Instead"
it takes place individually and se'uentially as part of the overall conversion of line-items in a given
account( )f course" the effect of that rounding cumulates in summing all of the account-s individual
line-items to yield its balance( In turn" the balance itself may re'uire additional rounding( <ecause
even medium-si>ed companies nowadays may have thousands of accounts with tens of thousands of
individual line-items" the effects of rounding can be 'uite substantial( 1ence" in modifying
accounting systems" pioneering firms have found it necessary to check for rounding differences and
make appropriate bookkeeping ad7ustments to minimi>e their impact ?@ickards" *//%A(
!he EU-Commission has provided clear rules ?#rt( ++B E9CA for converting amounts denominated
in foreign currencies( #s previously mentioned" the Commission adopted these rules in %&&=( !hey
became effective on % .anuary %&&&" and re'uire that conversions into a national currency be made
via the euro( #lthough the rules thus remove any ambiguity about how enterprises should carry out
such conversions" it is unclear to what extent firms are complying with them( !hat is because many
companies still use software incapable of executing the re'uisite conversions in every accounting
module(
E&&ects o& t'e Euro &or companies
Modi&ication o& t'e &irm*s accountin) systems
In any event" firms also must decide the point?sA in time at which to convert both foreign currency
amounts into their national currency and their bookkeeping systems into euros( !he pioneering
companies studied chose the end of the business year as the appropriate time point( !hey then closed
out their old business year in their national currency ?say" 5A and opened their balances for the new
year in euros( #d7usting entries made after year-end to correct amounts in the old business year for
reporting purposes necessarily affects opening account balances on the new year-s balance sheet( $o
pioneering firms have found software capable of maintaining records in two currencies
simultaneously to be particularly useful(
odifying accounting systems to accommodate the euro-s introduction furthermore re'uires
decisions about how to treat unreali>ed currency exchange profits and currency changeover expenses(
<ecause rates for converting the national currency of Euroland-countries into the new money are
fixed" there no longer exists any exchange rate risk( $o simply revaluing stocks of these foreign
currencies at the respective established fixed rate" as some pioneering firms have done" seems to be a
reasonable procedure(
1ow to handle expenses associated with the common currency-s introduction is another 'uestion with
ma7or implications for companies in Euroland( 4or instance" how should the costs of complying with
mandatory reporting in two currencies ?the national money and the euro during the transition periodA
be recorded6 In most of the larger countries ?e(g( 4rance and 9ermanyA the pioneering firms are
establishing reserves to cover changeover costs and to provide for unforeseen contingencies
associated with them ?8obes and ,arker" *///; !ischbierek" %&&DA(
# last ma7or accounting 'uestion pertains to the conse'uences of the fractional amounts" limits on
depreciation" and so forth still embodied in many national laws( 0hether one rounds fractional
amounts up or down when converting to the euro can have a substantial impact both on the amounts
involved and" hence" on legal reporting re'uirements( Unfortunately" enactment of re'uisite national
legislation has lagged far behind the need of enterprises to answer this 'uestion with certainty(
E&&ects o& t'e Euro &or companies
IT systems
Introduction of Euro challenged older management information systems can be( ,ioneering firms
therefore often have treated them as opportunities to replace older systems" many of which had been
developed in-house( 8aturally" not every company can replace all its information systems at once(
!he pioneering firms" though" have been inclined to switch to new" 2off-the-shelf3 software
applications" particularly for those systems handling highly standardi>ed processes( Especially for
external accounting and reporting purposes ?e(g( balance sheets" income statements" cash-flow
statements" and so forthA there is today little reason to develop and maintain an enterprise-specific
system( In choosing a modern system" however" the company-s controller must bear several
important points in mind ?4rEhling and Cehler" %&&FA(
4irst" has the software supplier from the outset conceived the system to handle multiple currencies" or
has the vendor merely appended a few conversion functions to a previously existing system6 #s
discussed further below" ex post facto attempts to 2bore upward3 from single-currency bookkeeping
systems can cause considerable problems(
$econd" does the software allow users to make ad7ustments in accounts involving interconnected
transactions and several currencies6 $uch a capability is desirable because it substantially reduces the
need to intervene manually in automated accounting processes(
!hird" does the software generate a migration path together with a clear protocol of the procedures
executed to modify the accounting systems6 $oftware with this documentation capability supplies
useful references in the event of future 'uestions about the exact steps taken during the currency
changeover(
4ourth" is the software sufficiently flexible6 4lexibility is important because within the transition
corridor firms still have a timing problem( # firm must decide at what specific point?sA in time its
accounting systems will switch from the national currency to the euro( !here are two possibilitiesG
first" changing all systems on a single date ?the so-called 2big-bang3 alternativeA; and second"
changing individual systems and subsystems successively within some interval of time(
E&&ects o& t'e Euro &or companies
IT systems
!he first alternative places enormous demands on the currency conversion pro7ect team( !hat is
because" however brief the specific time point may be" during the changeover all accounting systems
are unavailable for their usual processing tasks( Unfortunately" there is no other way to modify 2over-
integrated3 systems( # system is over-integrated when newly entered information automatically
updates databases for all its subordinated modules( $o" for example" a withdrawal of lubricant from
the supplies inventory immediately affects both the monetary value of the supplies account balance
shown in the ledger and the manufacturing overhead expense recorded in the internal cost accounting
subsystem( )verlooking over-integrated systems thus easily can lead to mistakes calling the
software-s overall integrity into 'uestion(
# further problem can arise if the applications in use are from different software suppliers( $uch
applications may prove difficult to integrate with one another( oreover" after switching to the euro"
reporting systems typically cannot access readily stored information denominated in the national
currency( 4or all these reasons" the 2big-bang3 alternative is unlikely to prove to be an optimal
solution(
In contrast" a successive changeover in software subsystems is advantageous precisely because it
affords a high degree of flexibility( ,roceeding in this fashion" though" demands a lot from the
standard software employed( Each functional module must be independent of the currency
changeover undertaken in the ledger( !his condition" in turn" is met only when all modules are
capable of handling multiple currencies simultaneously( #t any given point in time" the firm then can
begin euro-accounting( 4rom the chosen time point onward" the software will process all transactions
in the currency used and convert the amounts into both euro- and" say" 5-values( !hese transaction-
level data constitute the basis for dual-currency accounting reports( $ubse'uently" the firm can switch
off its old accounting system ?in 5A whenever it wants( !he ideal time point to do so is when all the
system-s functional modules report in euros and users are confident of the results( 5uplication of the
information involved is unnecessary because intelligent use of data bank layers makes it possible to
store 7ust the essential value fields ?uksch" *//%A(
!his application clearly is the better option( In contrast to the 2big-bang3 alternative" solving the
transition problem in a series of successive steps leaves the reporting system completely functional
all the time( 1ence" all module reports are available in both currencies throughout the dual-currency
phase of the transition process(
ene&its and costs o& t'e Euro &or speci&ic industries+ mar,ets and %usiness strate)ies
E&&ects o& t'e Euro &or companies
Modi&ication o& t'e &irm*s in&ormation tec'no(o)y
!he changeover to the euro has an impact on the firm-s information technology structures too( #s a
simple example" consider the re'uirement to display prices in both euros and the national currency
during the transition phase( !his 2dual price-marking3 can increase exponentially during sales when
prices change fre'uently( )f course" every such change necessarily leads to alterations in numerous
sales and marketing documents( 1ence" it may make sense to use the currency changeover as an
occasion to develop an electronic product catalogue that communicates with the article and price
stem in the company-s databank( !he advantage is obviousG one can update price lists together with
the appropriate sales and marketing documents continuously and efficiently( #s a result" the sales
force always can work on the basis of current information( !he enterprise furthermore can issue its
product catalogue either off-line as a C5-@) application or directly as an Internet or intranet
solution( )ne can expand the latter successively to cover both computer-aided selling ?e(g( customer
contact management" sales administration" advertising videosA and the firm-s controlling
re'uirements ?e(g( analysis of results" automatic determination of sales commissions" computation of
area- and customer-related standardHtarget sales volumes" variable costs" and contribution marginsA(
!he transition to the euro also presents a good opportunity for firms to begin using 2data
warehouses3( # data warehouse is a consistent data pool into which flow both internal data about the
company-s operations as well as external data ?e(g( downloaded from the 0ebA( #ll these data are
available to in-house analysts in an optimi>ed format ?uksch" *///A( <ecause data warehouses
usually contain information from multiple functional areas of a business" they tend to be large and to
have a high degree of complexity(
E&&ects o& t'e Euro &or companies
Modi&ication o& t'e &irm*s in&ormation tec'no(o)y
@ecently" though" a growing demand for smaller" less complex data warehouse solutions has
emerged" especially in decentrali>ed enterprises ?Iller" *//%A( $uch solutions re'uire tailoring to
the data-mining needs of the specific departments involved( Called 2data marts3" these mini-data-
warehouses contain data sets created to meet those departments- analytic re'uirements( $everal of the
pioneering firms observed furthermore have found it useful to develop 2independent data marts3(
<ased on a data warehouse solution" they are isolated systems for supporting decision making in
temporary pro7ects(
)ne can conceive of both data warehouse and data mart solutions as either relational or
multidimensional analytic systems( !he expression online analytical processing ?)L#,A pertains to
analyses based on the latter system type( !he fundamental ideas of )L#, are as follow(
Employing the same database" different users in a company can analy>e variables along dimensions
of particular interest to them simultaneously( 4or instance" a sales manager may want to analy>e how
well the firm-s various products have sold in a given region across time( eanwhile" a product
manager may want to know how many units of a given product customers have bought in all the
enterprise-s sales regions during the past several months( 4or his part" the chief financial officer may
want to compare cash discounts taken across all products and regions in a particular month( #t the
same time" the chief operating officer may want to 7uxtapose the contribution margins of some subset
of products in certain regions and months( )n-line analytical processing of a data cube with the
dimensions product" region" and month would allow all four managers to pursue answers to their
'uestions concurrently(
!he analytic instruments available within a multidimensional )L#,-framework therefore have great
versatility( In addition" they permit modelling of individual user algorithms ?4rEhling and )ehler"
%&&FA( !his feature has proved 'uite helpful to some of the pioneering firms studied in overhauling
their functional controlling as they began their changeover to the euro(
Euro and eCommerce
<y eliminating currency conversion costs and" more important" exchange-rate risk" the introduction
of the euro has eliminated two important obstacles to intra-European trade and the completion of the
single European market( !his will have a significant impact on trade links within the region(
Existing studies indicate that monetary union could more than triple bilateral trade between countries
over a %/- to %B-year period(
4or larger companies" many of which already trade across the euro >one" the benefits of a single
currency are somewhat different( anufacturers" for example" have traditionally kept a proportion of
their overall production in their different export markets as a natural hedge against the effects of
currency fluctuations( 4or these companies" the single currency creates an opportunity to realign
production strategy across markets to reflect more accurately the benefits and costs of manufacturing
in different countries( !hese market integration effects are being reinforced by the growth of
eCommerce in Europe( #lthough business-to-consumer eCommerce has played an important role in
integrating Europe-s markets" business-to-business eCommerce has had an even greater impact on
trade links" especially as more and more companies encourage their suppliers to develop online
capabilities( #n important factor has been the rise within Europe of several <*< exchanges" the aim
of which is to coordinate transactions between buyers and their suppliers(
9rticle published online, 1ernon : Ellis
Euro and eCommerce
)ne example" from the consumer packaged goods industry" is C,9market(comJa 7oint venture
between 8estlK" 5anone" 1enkel and $#,Jwhich has facilitated the electronic sourcing of more
than L*// million worth of consumer products across most European countries( !o date" ;// buyers
and %"/// suppliers have been trained to use C,9market(com-s electronic sourcing and negotiation
tools" which can function in five different languages( !he average cost savings for purchasers" in
terms of reduced product costs and time spent on the tender process" has ranged from %/ percent to %B
percent(
!o improve efficiencies in the reinsurance industry" unich @e and $wiss @e have created inreonJ
an electronic platform for trading standardi>ed insurance products( #s of 8ovember *//%" & sellers
and ;/ buyers had 7oined the inreon platform" some spanning %& European countries and the United
$tates(
9rticle published online, 1ernon : Ellis
Euro e&&ects and eCommerce
8ot only are European markets becoming more integrated as a result of these developments" they are
also beginning to function in a more competitive way( <y providing a common metric for price
comparisons" the single currency will highlight the often-significant price disparities that can exist
across the euro->one countries( #llied to a separate trend toward market deregulation in EuropeJin
the telecom sector" for exampleJthis price transparency will boost incentives for companies to sell
across national boundaries and for consumers and businesses to find the best suppliers(
eCommerce is also contributing to keener competition" principally in two ways( #t one level" the
Internet offers a highly efficient means of reducing search costsJthe time and effort it takes to find
goods or services of the right price-'uality combination( It enables the development of sophisticated
search mechanisms" such as online auctions and reverse auctions ?in which the buyer specifies the
goods or services re'uired" and suppliers compete to meet this demand at the lowest priceA( #lthough
sometimes regarded as a <*C phenomenon" these types of search mechanisms are becoming
increasingly important in <*< eCommerce" particularly for the types of trading exchanges mentioned
above(
!he second way in which eCommerce will promote more competition is by lowering barriers to
market entry( In fact" eCommerce newcomers tend to be established companies" not startups" as once
expected( !he experience of the dot-coms has shown how difficult it is to enter markets successfully
with no brand history and limited management expertise" despite the other advantages offered by
online trading(
9rticle published online, 1ernon : Ellis
-ears and Euro.S,epticism
-ears / stron) Euro0
#ccording to a recent report by $tandard M ,oor-s" 2!he strong appreciation of the euro versus the
dollar threatens European businesses because" according to analysts" a %/N rise in the euro can have
the impact of lowering exports by one percent" and lowering 95, by /(*BN(3 9alOn believes that 2it
is hard to establish" a priori" a specific figure3 regarding how much 95, growth the strong euro will
take away from the euro >one-s 95,( 1owever" he estimates that 2it is going to be a serious problem
for business activity" and the recovery process is not going to be a short-term oneP( In other words"
once economic activity slows down as a result of the loss of competitiveness that stems from foreign
exchange rates" the recovery process in the Qreal- economy will be slow(3
auro 9uillKn" director of the Lauder Institute at 0harton" warns that 2the European companies
affected the most are those companies whose sales depend less on trade within the euro >one" and
depend more on the U($( market and the dollar >one ?especially" the 8ear EastA(3 In that regard" $M,
identifies aerospace and defense as one of the sectors most exposed to exchange rate fluctuations(
)ne of the companies that will suffer the most is E#5$" which earns about +BN of its revenues in
dollars( #nother could be <ritain-s @olls @oyce" which earns *BN( !he automotive sector will also
suffer" including <0" which has **(;N of its total sales in the U($(; 5aimler" which has %&(DN and
Colkswagen with B(*N( #ccording to $M," during the first nine months of *//D" the rise of the euro
had a negative impact of R+// million on the operating profits of Colkswagen( #s for <0" its
revenues would have increased by %;N" but only rose by %%(%N during the same period because of
the strong euro(
-ears / stron) Euro0
2!he appreciation of the euro will have a significant impact on $panish and European companies"3
notes .osK Ignacio 9alOn" director of social corporate responsibility at the University of $alamanca
Sin $painT( 2!here is a certain delay in getting statistics and reports about Sthe impact onT corporate
earnings( 0e are involved in a process that began in financial markets but is now having an
increasingly serious impact on Qreal- markets( !he impact of the appreciation of the euro on $panish
and European companies is two-fold( It has a positive effect and a negative effect" although I think
the negative effect will be significantly more important than the positive effect(3
,ere ,uig" professor at the E$#5E business school" believes that 2the strength of the euro has a
global impact on European companies given today-s conditions because there are great imbalances in
exchange rates(3 !he impact" he adds" 2is in the loss of competitiveness in the U($( market as well as
in other countries where U($( products are imported more cheaply" thanks to the fact the dollar is so
cheap(3
#t a time when the U($( economy is slowing down and global financial systems are experiencing
turbulence" ,uig believes that 2European exporters are more worried about the loss of growth in
international markets than about the appreciation of the euro(3 9iven these conditions" he
recommends 2companies not only move into countries that have lower costs and weaker currencies
but that they also focus on expanding in markets where demand is growing faster" such as in #sia(3
China and India will both be key countries in coming years" says ,uig( 2!his is the time for
positioning yourself in these markets" not only as way to protect yourself but also to expand your
business and grow(3
9rticle published online, Uni+ersia*;nowledge<2harton , 200=
Euro / S,epticism
(amin) t'e Euro
It is not the best environment for building trust in the economy of the Euro>one" and its currency(
*//B - public opinion survey in 9ermany" B&N of the population would prefer to return to the
5eutschmark" and abandon the euro(
*//B - $tern" the 9erman maga>ine" published a report that was vigorously denied by authorities(
@eportedly" members of 9ermany-s <undesbank and its inistry of 4inance had gotten together to
analy>e the damage the monetary union was inflicting on the 9erman economy( $upposedly" the
analysis showed that the euro had deprived the economy of %(; percent of its growth( 20henever
things go poorly" there is a temptation to blame someone( 8ow" it appears that the euro is getting all
the blame3(
9rticle published online, Uni+ersia*;nowledge<2harton , 2005
Euro / S,epticism
2(amin) t'e Euro
20hat is missing is a promotional campaign( !hey have to highlight everything that has been
achieved with the EU SEuropean onetary UnionT( !he financial situation for every citi>en is
better since the arrival of the euro( Low interest rates allow us to consume Smore easilyT" and make
investments that we could not make if interest rates were high( 0e have to make a rational appeal Sto
peopleT about what we have achieved(3
2!he euro has become the second-most important currency in the world( !hat has provided some
advantages that local economies could not have achieved( #lthough it does not look that way" the
euro has given back to Europeans a part of the monetary sovereignty they had lost over time as a
result of globali>ation" and the free global movement of capital" which reduced the impact of
decisions made locally( !he greater scale of the EU has allowed Europe to recover part of its
sovereignty" since every country now has a voice in this area" within the European Central <ank(3
9rticle published online, Uni+ersia*;nowledge<2harton , 2005
Euro / S,epticism
2(amin) t'e Euro
!hanks to the currency" Europe has achieved the price stability that 2was necessary for creating a true
internal market( In Europe" we have never liked variations in SourT exchange rates( #nd the euro has
put an end to those fluctuations"3 he explains(
)ne of the factors that led to the rebellion of the Italian labor minister should actually be seen as a
virtue( 2!he onetary and Economic Union is preventing governments from using artificial measures
to increase their competitiveness" such as currency depreciation(3 !he Italian government would like
to devalue its currency" in order to make its products more competitive in global markets" and
promote exports( !hat-s the way things used to work(
9rticle published online, Uni+ersia*;nowledge<2harton , 2005
Euro / S,epticism
2It remains to be seen if the political community is ready to listen to the population" following the
setbacks suffered by the Constitution in 4rance and the 8etherlands" and the outbreak of
Euroskepticism that resulted( !his week will offer the first opportunity to erase this image of
despotism" at the summit of the European Council on .une %F and %D( #ll of Europe will be paying
attention to the message that results(
4atOs says" 2I believe that" as on previous occasions" time will pass" tensions will subside" and
progress toward integration will continue ?perhaps more slowly" and perhaps without a ConstitutionA(
In reality" there are no alternatives to the economic integration process and to the euro( !his isn-t the
first time this has happened to an economic integration treaty" and it won-t be the last(3
aroto says" 2!he situation will be put on the back burner" and they will insist on the constitutional
process( If they do that" they will be making a big mistake(3 In his view" they should take advantage
of the situation 2to clean the table" and return to discussing what kind of model of Europe we want(
Even if we wind up throwing away many plans now on the table" at least the table will be cleaned up"
so we can talk( 0e have to stop and listen to ordinary citi>ens"3 he says(
9rticle published online, Uni+ersia*;nowledge<2harton , 2005
Euro / S,epticism
Little by little" experts hope" things will calm down" and move beyond the current dangerous debate
on the common currency( 2It-s time now for us to calm down" and not exaggerate things( !he world is
not coming to an end"3 says $teinberg( 1e believes the agreement that was signed by every member
of the EU is the greatest endorsement of the future of the common currency( 2!he euro may not be
forever" but clearly" if you have a commitment to go back to" it is harder to make a break Swith the
pastT( 0hen a couple goes through a period of crisis" it is more likely that they will stay together if
they are married because they have a commitment behind them( 9etting out of the E$ SEuropean
onetary $ystemT involved some costs" but you could do it( !hings are a lot more complicated with
the EU"3 he explains(
4rance was the fuse that set off the flame of Euroskepticism after the referendum on the constitution"
leading to negative feeling about the euro( 1owever" 4atOs notes that public sentiment was 2less
negative Sin 4ranceT than in Italy or 9ermany( In 4rance" public opinion turned more against the
4rench government than against European institutions"3 he concludes
9rticle published online, Uni+ersia*;nowledge<2harton , 2005
#'at do USA t'in,s a%out t'e Euro0
#'at US t'in, a%out Euro0
How will EMU benefit U.S. exporters?
EU is decreasing exchange transaction costs and related expenses for companies with international
operations( EU will also increase opportunities for U($( exporters to expand their business across
European national markets( !his will be due to the enhanced transparency which the single currency"
the euro" is creating( !he euro is also lowering currency exchange transaction costs(
Will the euro create opportunities to develop e-commerce, mail order and direct maretin!?
#s EU unifies the national markets in Europe this will fundamentally change the practices for both
marketing as well as financing( !he unification of the European markets presents opportunities for
exporters to expand their existing markets( !he single market allows business to be conducted with
lower costs and across national boundaries without the risk of transaction costs( !his will allow the
exporter to invoice in either the dollar or the euro and to ship between EU participating nations
with minimal exchange risks( #ll of these changes will most certainly have an effect upon alternate
forms of sales and marketing( E-commerce will certainly increase as all prices are redenominated in
euros and have become comparable( !his will allow consumers to purchase across national
boundaries and purchase goods that were once priced in foreign currencies( $uch accessibility will
drive a new market which will become much more dynamic( It is also likely that as the European
market integrates it will also become more competitive( !his means that more consumer friendly
marketing and sales strategies will be explored( U($( exporters should be exploring their options to
increase sales presence in Europe through e-commerce and direct sales( !hese strategies will enable
U($( exporters to conduct business in Europe without having a physical presence in Europe(
U7 %epartment of -ommerce, 200>
#'at do CEOs t'in, a%out t'e Euro0
#'at do CEOs t'in, a%out t'e Euro0
2the most important challenge we are facing is how to make sure that the single currency will be a
catalyst for change and provides the incentives for removing the structural chains which continue to
limit our competitive capacities3 ?,aolo Cantarela 4I#!A;
2Euro will lead to an increased competition in Europe" thus only firms with efficient structures will
be able to maintain on the market and will be profitable3 ?anfred $chneider-CE) <ayerA;
#'at do CEOs t'in, a%out t'e Euro0 1Cont(A
2 we think that the monetary union will stimulate the EU growth potential and will contribute to an
improvement of the investment environment3 U ?.urgen $chrempp- CE) 5aimler <en>A;
2we are advised not to get trapped into the euro trap and are trying to avoid to focus too much on
Euro and its implications forgetting about the U$# and the realities of the rest of the world3 ?@olf-
Ernst <reuer CE) 5eutche <ankA;
2in the end" in time" Euro will prove to be beneficial for everyone3 ?0arren <uffet-CE) la <erkshire
1athawayA;
#'at do CEOs t'in, a%out t'e Euro0 1Cont(A
2 the real issues dealing with rationali>ation" consolidation" flexibility of the labor market which is
less discussed U no matter how well may sound these effects of the Euro -" is that" on short run" Euro
may cause turbulences and uncertainty3 ?8iall 4it>9erald-CE) UnileverA;
2once the Euro introduced" it will make possible to get significant economies of scale" e(g(
diminishment of the transaction and hedging costs and better opportunities for managing the cash
flow3 ?.orma )llila-CE) 8okiaA;
#'at do CEOs t'in, a%out t'e Euro0 1Cont(A
2we all are aware of the political roots of the EU U the will to get together the European nations as
a mean for preventing conflicts and the supremacy of a single nation" whatever this might be(
#lthough Euro is a pro7ect with strong political grounds" I think that it became a economic-based
pro7ect3 ?1erb #llison-CE) erill LynchA(
2I am against EU" but this is 7ust my personal opinion3 ? @obert urdoch U CE) 8ews
CorporationA