Mike, interesting set of articles in this week's "Defense News" and "Space News" about the coming adoption of the Euro. Same set of articles in both rags.
Among the points made:
1. John Weston, CEO of British Aerospace, told an audience of business people in Washington on October 7, that the Euro "will result in a core of 11 European countries commanding 18.6 percent of the world's trade and 17.8 percent of the world's gross domestic product. In other words, the European countries will command more trade than the United States."
2. European industrialists say that the Euro is key to wiping out the disadvantage they face, especially in the space and civil aircraft markets, whenever they are forced to denominate exports in dollars.
3. DaimlerChrysler Aerospace AG, intends to urge customers to write contracts in euros rather than dollars. DaimlerChrysler Aerospace expects to save 100 million deutsche marks annually simply by switching its accounting to euros.
4. Rheinmetall Industrie AG, Ratingen, Germany, predicts the euro will replace the dollar as the strongest currency in Europe within two to three years of its introduction. Rheinmetall intends to undertake the majority of its contracts in Euros.
5. John-Jacques Gauthier, deputy director for finance at Matra Marconi Space, stated that "What we hope to see, not immediately but in the coming years, is European customers demanding that contracts be in euros. I think our U.S. competitors would find that an interesting experience."
6. On the other hand, the world's largest arms importing region in the developing world, the Middle East, receives oil revenues, the major source of income for many nations there, from dollar-denominated contracts, and Bryan Callan, an analyst with Merrill Lynch, predicts that will make it difficult to persuade those customers to start denominating those contracts in euros.
7. This last one you may find ironic: John Makin, a senior fellow at the American Enterprise Institute, stated that there was no indication that the euro would be used as a reserve currency. It has to establish a track record. "One reason is the role of the European Central Bank, and its independence from political pressure, still is not clear, he said.
Anyway, one more factor to weigh in the equations, coming January 1, 1999. Not long to wait and see. |
