Strong Euro, Weak Europe?

July 7, 2005

   As the 2000s progressed, the shining example of the New Europe came with a unifying currency: the euro. Exchange rates could go out the window, as continental commerce could be equalized and one monetary system could represent Europe in the world.
   A secret hope of some European economists, as preparations began to change 13 national currencies to the euro, would’ve been a shift in the balance of economic power worldwide. As it turned out, they got their wish.
   And, in walking the aisles of Stone+tec 2005 in Nuremberg, Germany, in late May, nobody’s particularly happy that this financial fantasy became reality. In the international stone trade, the market did shift because of the euro … but Europeans aren’t sitting at the head of the table.
   June 30, 2000: €1 = US 95¢
   The euro looked like the best thing to happen to U.S./Europe trade, including stone, when it came to simple buying and selling. Outside of currency buffs and some super-nationalists in some European countries – and, of course, Margaret Thatcher and her devotion to the pound sterling – everyone liked the idea of the euro.
   For one thing, U.S. customers of stone could look at the euro – somewhat erroneously, although it didn’t matter much in the early 2000s – as the continental version of the U.S. dollar. To us in the U.S., anything looked better than trying to convert and account for Italy’s lira
   Oct. 27, 2000: €1 = US 83¢
   The euro began to look fantastic as its value began to vary and it found its own value in the market. At this point – and at other times, such as mid-2001 – you could get more for your money, where a hard contract for stone or machinery earned you a discount of 10 percent or better.
   In the U.S., these were the great days of the euro, where suppliers and fabricators could engage in arbitrage. At the beginning of 2000, a €200,000 machine cost $200,000, give or take a couple of grand. At 83 cents to a euro, though, that €200,000 is really $166,000, providing a 17-percent savings.
   Of course, producers in euro-based countries could (and did) adjust prices to compensate for the decline in value of their currency … but, of course, this is all in the process of embarking in a new age of finance.
   June 30, 2002: €1 = US 99¢
   Finally, when the euro began to climb out of the 10-cent-or-better discount range, European selling and U.S. buying began to equal out – in theory, at least. All you need to do is adjust prices back to reflect the changed value of the dollar, and the market is balanced again.
   Unfortunately, that didn’t happen. Some European manufacturers and stone suppliers liked the idea of arbitrage working in their favor for a while. Why not keep prices or raise them a bit?
   Dec. 5, 2002: €1 = US $1.00
   I’ve mentioned before that this day noted two things – an blizzard descending on Baltimore during that year’s StonExpo, and the day that one euro began its current string of trading at a value equal to, or more than, one U.S. dollar.
   If there’s any blame to pass around on what’s happened since to the euro and the dollar, don’t point fingers at Brussels or Berlin or Bologna. Direct your digits of detriment squarely at the White House, where a weak dollar is apparently the key to the long-term recovery from the Internet bubble of Bill Clinton and the post-terrorist-attacks economic slowdown under George W. Bush.
   This economic policy – possibly the only discernible one from the current administration – does wonders for some trading partners such as China, where the yuan hews extremely close to the U.S. dollar. For Europe, it’s another matter – just how high can the euro go in gaining strength?
   June 1, 2003: €1 = US $1.17
   For many exhibitors at Stone+tec 2003, the United States is already a hands-off market. There’s plenty of talk about the euro being out of whack in dealing with U.S. customers. Who’s interested in a €200,000 machine that, just seven months ago, was $200,000 – and now costs $234,000?
   Maybe in a little while the situation will change and things will get better, I heard again and again. I heard it at Marmomacc in Verona that year, too.
   June 30, 2004: €1 = US $1.21
   There’s not much talk about things getting better. Most of the chatter comes from U.S. distributors, who complain that euro-based vendors are holding onto artificially high prices and gouging overseas customers.
   An economist would argue that this statement is correct. A European business owner would point out that he and his workers are getting crunched by an indifferent world economy and less buying power of the euro because of its economic strength. Major price adjustments on the current stock of goods would make for great theory, and also cause insolvency.
   Dec. 31, 2004: €1 = US $1.36
   Economic winter comes at year’s end, as the euro hits the high-water mark. It portends a slow beginning to 2005 for many in Europe that still lingers as exhibitors arrive in Nuremberg for this year’s Stone+tec. Not only are European stone merchants and equipment manufacturers glum; they see their show dominated by non-continental exhibitors, especially the Chinese.
   Questions about doing business in the United States are answered, at best, with a shrug. One day the exchange rate will change, but it’s hard to get excited about a market where, in October 2000, a €200,000 machine sold for $166,000 – and, at the end of 2004, the exact same machine carried a $272,000 price tag.?
   June 14, 2005: €1 = US $1.21
   Maybe things are getting better. The exchange rates are falling, mainly due to the recent jettisoning of the European constitution by France and The Netherlands. (Switzerland, at the same time, approved it – but they don’t use the euro, either.) As a result, the “one continent, one economy” idea may get some needed tuning to encourage a better trade position outside the continent.
   The U.S. market isn’t finished for the European stone industry. Stone itself will be a tough sell, but it’s going to be a high-quality niche business anyway for all but the massive-volume exporting countries. And machinery can still do well, as equipment imports from non-euro countries (mainly China) are only now gaining attention.
   And, of course, there’ll always be an England, where people seem keen to purge Baroness Thatcher from their collective memory … and then, when they hold a few five-pound notes in hand and think of the euro’s problems, mumble a quiet, “Er, that Maggie. God bless ‘er.”