Sunday, December 21, 1997

U.S. execs fear EMU instability

By PETER MARSH / The Financial Times

CLEVELAND -- Big U.S. manufacturers with large sales and production bases in Europe see economic and monetary union as creating significant risks to business stability -- even allowing for the project's potential to simplify commercial operations across the continent.

In an informal Financial Times poll of senior executives in 10 of America's biggest industrial companies, the business leaders were evenly split on whether a single European currency and uniform monetary policy would boost overall competitiveness in Europe.

Half expressed fears that a currency union might either prove unworkable -- for instance, because of lack of common economic conditions or political squabbling -- or do little to improve what they see as a generally negative business environment linked to expensive social legislation and inflexible working practices.

In spite of these fears, half the executives said that the practical effect of any prolonged decision by Britain to stay out of the project could make them less likely to invest there, with three saying Britain's stance would not make a difference and two failing to express an opinion.

The 10 companies have combined annual sales of $55 billion, $15 billion of which comes from Europe, where they have more than 50,000 employees.

Stephen Hardis, chairman of Eaton, the controls and automotive parts company, said that in the absence of a European-wide political union, he found it "hard to believe" that individual governments were prepared to cede control on monetary policy to the unelected staff of a single European central bank.

The restrictive monetary policies that would result would force up unemployment in some regions to levels that voters in individual countries would find unacceptable.

Alfred Rankin, chairman of Nacco, one of the world's three biggest lift truck makers, said: "There will be a real effort in the countries that join EMU to impose social legislation in the name of harmonization that will make the region less competitive. Unless countries (such as Britain) can protect themselves from this kind of legislation, they would be better to stay on the outside."

James Perrella, chairman of the Ingersoll-Rand engineering company, said: "Europe has a problem (on competitiveness) and EMU is not going to make it better."

Bill Hudson chairman of AMP, the world's biggest maker of electrical connectors, said: "The feasibility of EMU depends on the resolve of Europe's political leaders (to deal with matters such as social costs and fiscal policy)... and they don't have a great record on this."

More optimistic about EMU was Jim Henderson, chairman of Cummins, the big diesel engine maker, who was "impressed" by the efforts of European governments to bring about economic convergence in the past two years and confident the project would start on time in 1999.

(Distributed by Scripps Howard News Service.)