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EDITOR’S LETTER – Anything to declare?

There are three ways to interpret our “Welcome to Euroland” cover illustration, but only two of them are optional. First, one might look at the circle of 11 euro symbols and argue that it means, “The euro is incomplete without sterling.” You may choose to believe this, or not. Alternatively, the reference to “Euroland” could be interpreted as a stark warning that the advent of Emu will ultimately herald a new European political union. Just as every nation must have its own currency, so the converse must also be true, and so the euro will need its own “euro-nation”. Again, you may choose to believe this, or not. But what cannot be denied is this: the euro is going to be a truly transnational currency (the US dollar, by way of contrast, is merely an international currency). It will transcend national borders and, in so doing, will radically alter the way we think about exports and imports: by eliminating the very concept of currency risk within the eurozone, the single currency – taken together with the single market – will create an economic region that will, in many commercial respects, be indistinguishable from a nation state. So the euro will make it possible to source products from Germany, say, to sell in Italy, with no fear that currency devaluations will slash revenues or bloat the cost base. But because the euro eliminates the whole issue of currency-matching assets and liabilities throughout a vast geographic region, it will, as Xerox Ltd FD Patrick Ponchon reveals in this issue, make it possible to be much more radical. Xerox itself is now driving for huge pan-European purchasing deals that will leave the company having to deal with a tenth of its current list of suppliers. At the same time, it is absolutely clear – despite what almost half of the respondents to our exclusive survey may think – that large foreign multinationals such as Mercedes, Philips and Siemens are going to be dealing in euros in about nine months’ time. They are, in effect, going to use their corporate muscle to outsource much of their residual forex exposure to their suppliers. Businesses that, hitherto, have merely supplied the UK subsidiaries of these industrial behemoths are now going to find that they are “exporting” to British-based customers. So again, our ideas of imports and exports are turned upside down – and the borders of Euroland may actually turn out to be just round the next corner. For this special issue of Financial Director – published on the eve of the single currency summit which takes place at the beginning of May – we have devoted almost the entire magazine to the euro. We are absolutely convinced that the single currency is the most important development to affect European business since 1945. We are equally convinced that too few businesses are ready for the threats and the opportunities that it will create. Welcome. You are about to enter Euroland.

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