Euroreality: Some Pain, Then Gain

Dec. 21, 2004

Benefiting from Europe's single currency will take work.

What if the euro fails? "There is a strong minority of very well-informed people, right across the academic and political spectrum, who would argue that there are too many inherent contradictions and problems with how this thing has been set up. And they expect it pretty much to crash," relates New York-based Tim Dwyer, national director of international human resource consulting services in KPMG Peat Marwick LLP's international executive services practice. However, only days before the Jan. 1 debut of the euro, Europe's highly promoted common currency, there's virtually no talk among U.S. and European executives of the European monetary union dissolving into disunion. The possibility isn't even in their contingency plans. The executives assume that the euro -- initially circulating among Austria, Belgium, Finland, France, Germany, Italy, Ireland, Luxembourg, the Netherlands, Portugal, and Spain -- will make it through three transition years and emerge in the year 2002 as the single replacement for such "traditional" currencies as the German mark, the French and Belgian francs, and the Italian lira. "To start planning for a euro meltdown is quite a bit premature," states Anthony Marsicovetere, a senior manager in KPMG's federal tax group, New York. Indeed, the first-year reality for the euro lies somewhere between a flawless performance and a disastrous debut. "The euro is going to go through a lot of pushing and shoving -- at least for the first year of its existence," confirms Alexandria, Va.-based Paul A. Laudicina, a vice president of A. T. Kearney Inc. and managing director of its Global Business Policy Council. The new European Central Bank, he says, will be pushing for a strong, stable currency even as the political heads of state shove fiscal and monetary policies in the direction of economic growth and social accommodation. But for firms doing business in Europe and willing to work within the new, unified monetary system, there's the promise of five major benefits, stresses Gregg Rusk, director of Grant Thornton LLP's Miami-based International Business Center.

With companies freed from figuring costs and prices in several different currencies, the euro should encourage trade.
Greater price transparency, a result of having one currency, should reduce the costs of doing business with Europeans.
The common currency will lower entry barriers to the European market.
The single currency will increase efficiency in marketing and distribution.
The euro will eliminate foreign-currency hedging's costs and complexities.

Still, these benefits will not descend on companies like so much New Year's Eve confetti. They'll need core euro-competency. In fact, months ago some companies decided they wanted to be euro-leaders and not euro-followers, indicates Daniel Orchant, a partner in KPMG's international executive services practice, New York. "Some companies have already taken the approach that they are going euro-exclusive from day one," he says. "Their corporate culture tells them they have to embrace change, be an initiator of change, and be aggressive." On the practical level, "The most important thing is that [companies] have a very strong cross-functional team in place to plan and manage the [euro-conversion] effort," states Bruce Clark, chairman and CEO, Stabiliteam, New York. Companies will need a project team, led by a senior executive, that understands "exactly what the euro means to their markets [and] their customers," stresses Paris-based Michael J. Mawtus, vice president for euro global initiatives for IBM Corp.'s Europe, Middle East & Africa operations. "The danger that a lot of people are falling into is to look at this [euro introduction] as just an IT [information-technology] challenge, make a basic low-level compliance response, and miss the fact that there are potentially dramatic effects on how their particular marketplace will operate." Indeed, "perhaps rather faster than they have done," companies need to be looking at Europe as a consolidating single market with fewer surviving companies in each business sector, emphasizes London-based Hugh Morris, a managing partner in the business process management practice of Andersen Consulting. "It's imperative companies say, 'Well, am I buying other people? Or are other people buying me? How do I rationalize my operations across Europe so that I am in the best shape possible?' "

About the Author

John McClenahen | Former Senior Editor, IndustryWeek

John S. McClenahen, is an occasional essayist on the Web site of IndustryWeek, the executive management publication from which he retired in 2006. He began his journalism career as a broadcast journalist at Westinghouse Broadcasting’s KYW in Cleveland, Ohio. In May 1967, he joined Penton Media Inc. in Cleveland and in September 1967 was transferred to Washington, DC, the base from which for nearly 40 years he wrote primarily about national and international economics and politics, and corporate social responsibility.

      McClenahen, a native of Ohio now residing in Maryland, is an award-winning writer and photographer. He is the author of three books of poetry, most recently An Unexpected Poet (2013), and several books of photographs, including Black, White, and Shades of Grey (2014). He also is the author of a children’s book, Henry at His Beach (2014).

      His photograph “Provincetown: Fog Rising 2004” was selected for the Smithsonian Institution’s 2011 juried exhibition Artists at Work and displayed in the S. Dillon Ripley Center at the Smithsonian Institution in Washington, D.C., from June until October 2011. Five of his photographs are in the collection of St. Lawrence University and displayed on campus in Canton, New York.

      John McClenahen’s essay “Incorporating America: Whitman in Context” was designated one of the five best works published in The Journal of Graduate Liberal Studies during the twelve-year editorship of R. Barry Leavis of Rollins College. John McClenahen’s several journalism prizes include the coveted Jesse H. Neal Award. He also is the author of the commemorative poem “Upon 50 Years,” celebrating the fiftieth anniversary of the founding of Wolfson College Cambridge, and appearing in “The Wolfson Review.”

      John McClenahen received a B.A. (English with a minor in government) from St. Lawrence University, an M.A., (English) from Western Reserve University, and a Master of Arts in Liberal Studies from Georgetown University, where he also pursued doctoral studies. At St. Lawrence University, he was elected to academic honor societies in English and government and to Omicron Delta Kappa, the University’s highest undergraduate honor. John McClenahen was a participant in the 32nd Annual Wharton Seminars for Journalists at the Wharton School at the University of Pennsylvania in Philadelphia. During the Easter Term of the 1986 academic year, John McClenahen was the first American to hold a prestigious Press Fellowship at Wolfson College, Cambridge, in the United Kingdom.

      John McClenahen has served on the Editorial Board of Confluence: The Journal of Graduate Liberal Studies and was co-founder and first editor of Liberal Studies at Georgetown. He has been a volunteer researcher on the William Steinway Diary Project at the Smithsonian Institution, Washington, D.C., and has been an assistant professorial lecturer at The George Washington University in Washington, D.C.