CoreNet Global Daily Reports

2005 Could Be a Key Year for European and Global Economies
By Richard Kadzis, CAE

Dr. Albert Bressand

Global storms are sweeping the world, buffeting the once-tranquil ramparts of business and investment. Imagine weather as a metaphor for the internet worked global economy, and it's obvious that the sunny prosperity of the 1990's has given way to a volatile low-pressure trough in the new millennium.

In presenting his "Weather Forecast for Europe" today to the CoreNet Global Summit in Lille, France, Dr. Albert Bressand offered some encouragement on Europe's potential as a stabilizing economic force for the rest of the world following the adoption of the Euro as the official currency of 12 of the continent's countries.

"The European economy has a deep coherence with the U.S. and Asia economies," Bressand observed. That interdependence has been tested by three hard - hitting global storms:

• The Internet depression
  
• Accounting haze and hail
  
• The 9/11 hurricane
  

Starting with the bursting of the Internet bubble, "we lost sense of proportion; we lost the wisdom," he said, quoting poet T.S. Eliot. "There was a misunderstanding of what technology is bringing," added Bressand, whose think tank Promethee is rated among Europe's best. "What creates value is not so much the Internet, it's the services offered through it, "an important reminder to corporate real estate executives who are increasingly employing the Internet to deliver support services within their companies.

The accounting scandals of the U.S. are teaching similar lessons. "Europe is just as exposed to global market psychology," Bressand pointed out in relation to Enron and other failures. "Trust was broken, numbers were reported that were at best pushed to the limit; at worst, they were cooked."

But Europe, which saw its own business failings exposed thorough Vivendi, Credit Lyonnaise and other scenarios, has mandated the adoption of International Accounting Standards (IAS) by 2005, a factor Bressand expects to bring some measure of economic stability, like the Euro could bring.

Europe's practice of "mutual recognition" of other nation's professional and business standards is another plus, he stated. "It's another reason to be optimistic about Europe."

Look for some improvements to the global economy over time, he stressed. Like the practice of mutual recognition, the introduction of the Euro will have positive, eventual impact because of:

• Tightly controlled interest rates across the board her
  
• A rapid "catch-up" process to the U.S. market in terms of the sophistication of the European bond market
  
• A parity in the future between European and U.S. equity markets that is already half-complete
  
• The completion of the Financial Security Action Plan by 2005, signifying the full integration of Europe's financial markets
  
• The addition of Eastern Europe countries including Lithuania and Estonia to the European Economic Community with support of established member nations
  

All told, according to Bressand, there's enough high pressure building to counteract the effects of todays' stormy global economy.