Don't discount Europe. Its inflexible labor market may be weighing on the economy, but greater financial integration across the euro area is continuing at a steady pace, setting the foundation for economic growth. And while many in Europe look uneasily eastward toward cheap labor and low-cost goods, others see the opportunities of a wide-open market. Meanwhile, professional sports organizations -- in particular, soccer (or football, as the rest of the world knows it) -- are eyeing Asia, hoping to win over the minds, hearts and wallets of new fans. These were among the topics discussed during the recent Wharton 2005 Global Business Forum European Conference.
At a panel session titled, "Europe Going Forward: Integration and Growth," three panelists agreed that integration of markets and regulatory bodies is a key factor in Europe's ability to grow. Riccardo Guglielmetti, CEO of Wall Street Italia, a web-based business news service, began by looking at productivity, focusing specifically on why such large gaps exist between the U.S. and Europe. While GDP has hovered between 1.5% and 2% in Europe over the last 10 years, he said, it averaged around 3.1% (or 4% if you take out 2001) in the U.S. during the same period. Guglielmetti suggested that the biggest culprit in Europe's productivity lag is the labor market, particularly labor unions, which have a stranglehold in Western Europe. In the U.S., "if you fail somewhere you can very quickly recycle yourself and start someplace else."
Another problem is the strong resistance to closing or even restructuring companies. Guglielmetti cited the airline industry as an example. "Pan Am and TWA were the closest things you had to national carriers, but we all know what happened to them," he said. Yet many European carriers have not met similar fates, despite heavy losses and inefficient operations. The protections offered to this industry and others constrain economic progress, he noted.
According to Luca Zerbini, a team leader at Bain, his European clients tend to have four distinct areas of interest: innovation and product development, strategic sourcing, cross-border M&A activity and private equity.
[continue]
Page 1 of 7
> >>