After six years of crisis, Europe is back; slowly so, but back. The euro has survived, the first structural measures have been implemented, the economic indicators are showing a light growth for next year and trust is quietly recovering. Not that all is now resolved, but…
The situation in the fast-growing emerging countries is not what many businesses from these markets were hoping for either. First, because these markets also need time for their development; second, because they too have to consolidate their growth; and third, there as anywhere else, is not all just about free trade. In short, there as well, all that glitters is not gold.
In the so-called BRIC countries, and for a series of reasons, any kind of production is not exactly made simple: trade barriers, poor quality of produced goods, just-in-time delivery made unrealistic by long delivery channels, some corruption, and last but not least, cultural barriers which greatly raise costs and do not match the immense expectations of the end client. As a result, many businesses are find themselves attracted again by Europe’s relative political and economic stability. On these grounds, Europe is considered the lesser evil.
Simultaneously America’s economy is rising; a country which has always been closer to Europe for cultural reasons, trusts more its institutions and also prefers to build on the long-standing connections with the Old Continent.
Even the Asian economy is leaning more towards Europe, in part conditioned by weakened exchange rates – like in India’s case – and in part by strategic reflections. This demonstrates that some of the old European industries are still setting the standards for the rest of the world. However, Europe also shows a divide, especially in regards to investors. On the one side, there are solid industries, infrastructures and reliable institutions in Central Europe, on the other side, you see weakening states with less productivity, mostly in the South.
In our context of shrinking margins and higher cost pressure, these arguments weigh twice as much. That leads, in my view, to a London-Frankfurt-Zürich axis, where and which determines the central decisions and which the non-European investors also have to turn to. We will have to face these changes, whether we like it or not.
Yes, I do believe that Europe is coming back but I also think that so will the crisis if we don’t push for more reforms. Unfortunately at the moment, Mrs. Merkel is setting a rather poor example. For all that, and as a precaution, I am preparing myself for a long-lasting crisis, that is, for lasting and quick changes in the market circumstances.