Gilardi, Carlo, Global Finance
The introduction of the single currency represents a great opportunity for all European companies. The euro promises a wide degree of monetary stability-something that constitutes, in both the medium and long term, the best guarantee for the development of each country's economy and the sectors of business operating within it.
Bilateral parities between national currencies will be fixed during the first few months of 1998. From January 1 1999 the euro will be a currency in its own right. European national currencies will be regarded as subdivisions of the euro, although it will exist only as credit money and its use will not yet be obligatory. On January 1 2002 euro coins and banknotes will enter into circulation, and national currencies will be progressively withdrawn. Finally, from July 1 2002 national currencies will no longer be legal tender.
The elimination of the European exchange rate barrier is of fundamental significance because it guarantees three major macrocurrencies-the euro, dollar, and yen-thus providing a more balanced scenario where European countries can offer stronger competition. Monetary stability in fact constitutes a valuable asset for a company, particularly one in a country such as Italy, long subject to abrupt swings in exchange rates.
Although currency depreciation may provide temporary advantages, in the long term volatility pushes higher inflation and interest rates, both harmful to competitiveness. Also, companies suffer from low credibility if they reside in countries such as Italy that attribute their competitive advantages mainly to devaluation.
The Benetton Group operates in 120 countries, exporting 70% of its production. We have always regarded Europe as a domestic market. …