Late last week, European Union heads of state gathered to hash out regulatory details for greater financial unity, find ways to bolster resources, and, once again, try to get more control over the unwieldy debt crisis. This week, the Web is awash in headlines about the agreement's fallout, stock market jitters, and, as always, political finger-pointing about who's doing what right or wrong.
Most financial, economic, and political savants are still passionately discussing the pros and cons of the EU mind meld led by German Chancellor Angela Merkel and French President Nicolas Sarkozy. I'm in no better position to predict how this will all play out in the coming quarters, nor what it means to the EU’s fundamental strategy of continental togetherness based on a common currency and open trade borders.
I have the same questions posed in this Financial Times story: Where is the fiscal union? Is there enough intergovernmental political will to implement terms of the proposed treaty changes?
As background, EU leaders pulled up chairs last week and over two days debated ways of imposing more central control over national budgets, evaluated penalties when deficits violated EU standards, sought to establish a permanent euro rescue fund, and explored other fiscal safeguards aimed at saving the euro.
UK Prime Minister David Cameron cast the sole veto, a decision that has all of Europe and the world wondering what’s next. Sweden, the Czech Republic, and Hungary at the time said they wanted their parliaments and political honchos to weigh in before deciding. And credit downgrades for core EU countries are likely, and the ease and legality around implementing the accord are raising eyebrows as well.
The short answers to the lingering questions of “Will this work?” and “What now?” are probably as simple as “Who knows?” or “Time will tell.”
What does all this mean for tech companies doing business both in Europe and abroad? What should they be considering between now and some point in the future when the impact becomes clearer?
Obviously, the region's demand picture will remain murky. Government, corporate, and consumer spending will largely depend on perceived long-term economic optimism, but more likely, as many tech companies cited during recent earnings calls, the coming quarters probably will remain soft, and many are monitoring their supply chains and product lifecycles closely.
The currency fluctuations could also affect balance sheets at tech equipment makers. On Monday, the euro slid to its lowest level in two weeks, and the dollar gained ground against other major global currencies.
However, for some sectors or companies in emerging markets with an eye on expansion, there could be good news on the horizon. The EU crisis could present opportunities for companies in places like China and India that want to break into or strengthen their regional presence; the crisis may tip European companies in favor of these kinds of partnerships. India-based IT provider HCL Technologies, for instance, expects the European debt crisis to help it buy and partner with local firms, a sentiment shared by some other organizations.
For sure, whichever way it goes, it will be a while before things will look “normal” again. After all this, will we even know what “normal” is?