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Like a Band-Aid being ripped off in slow motion from a cut, the ongoing economic and financial crisis in Europe is inflicting long, drawn-out — and some argue unnecessary — suffering across the region and the world.
Every day brings more grim news, fear and frustration while global stock markets have been stuck — barring the odd rally — in the doldrums. Growth in the euro zone has disappeared, with Eurostat reporting GDP in the 17-nation bloc shrank 0.2 percent in the second quarter, stirring fears the area is headed for a double-dip recession. In July, manufacturing activity posted its weakest result since summer 2009, there is fresh speculation that cash-strapped Greece will default on its debts and quit the euro, while Spain’s 10-year bond yields have zoomed past the crucial 7 percent threshold that triggered bailout deals for Greece, Ireland and Portugal.
This story first appeared in the August 20, 2012 issue of WWD. Subscribe Today.
It gets worse: Germany, the strong-woman of Europe, is now at risk of having its AAA credit rating downgraded by Moody’s because of all the euro-zone woes.
Europe’s economic flu is clearly impacting the rest of the world. The International Monetary Fund has warned that the region’s debt crisis poses a “key risk” to future growth in China, where the economy is already slowing down. American retailers and fashion brands from Abercrombie & Fitch to Gap, Tiffany to Ralph Lauren have said their financial performance is being impacted by the travails of the euro zone. The main thing driving business in the region is rich tourists from Russia, China and the Middle East.
With politicians and financial wizards alike vexed by all the developments, WWD turned to European fashion-industry leaders to hear what their solutions to the crisis would be. They offered up proposals ranging from fiscal and political union, to the devaluation of the euro, to more economic stimuli — or simply being more optimistic, however hard that might be. Here is what they had to say:
Patrick Thomas, Hermès chief executive officer:
“In Europe, the economic equation is so different from one country to the next that I do not think there is an overall measure that could resolve the problem, except maybe, and it is what I hope for, a political reconciliation, because as long as it does not exist, the same situation will remain. There is one point on which I believe [French President François] Hollande is right: If a company is in financial trouble, cutting costs cannot save it, and launching an economic stimulus plan at the same time, as long as it can be financed without creating further damage, is a good idea.”
Giorgio Armani, designer, founder and owner of Giorgio Armani SpA:
“I am not an economist, but the idea of a return to the lira seems like going backwards. I believe the situation could improve if there is a purpose in the purchase, if what you buy is useful. We must add value to the purchase and more quality to the product. There is too much of everything in women’s wear, but there should be more attention paid to the product, and not only because it’s new. Forget about the needs of the media or about designers pushed by the groups’ international interests.”
Thierry Andretta, ceo of Lanvin:
“In macroeconomic terms, Europe is bigger than the United States. But in the U.S., you have the political power to decide something, whereas in Europe it’s impossible to put together 25 countries. As soon as the political situation will become clearer — and we have an injection of optimism — the market will grow again. Lanvin is not concerned by the crisis; our market, both for men and women, is still strong. I hope that will continue to be the case. You have to be very coherent with the product, and it pays, or at least it has for us. The fact that we have very selective distribution, with which we have developed the business, is what has made the difference for us.”
Manuel Puig, vice-chairman of the Barcelona-based beauty and fashion group Puig:
“You have to go for fiscal and political union, which is easier said than done. And we have to work together as one continent so that we can compete with countries like the U.S. and China. Taxes need to be at one level across the euro region — it’s ridiculous that people within the euro zone will move from one country to another to take advantage of lower taxes. And you need one boss for the 25 countries in the zone. Who can do it? I don’t know. Churchill would have been ideal.”
Robert Bensoussan, chairman and ceo of British ready-to-wear and accessories label LK Bennett:
“There is no solution but the exit of either the weakest or the strongest countries from the euro zone. Their exit would allow the remaining countries in the zone to devalue the euro and boost the economy through exports.”
Joel Palix, president of Clarins Fragrance Group:
“I think a banking union would help, because it would mean that a bank in one country would not only depend on its own legislation, but there would be some kind of European guarantee. In cosmetics, business is still good in Europe. In times of difficulty, a lipstick or a fragrance is a great product to buy, so we’re more resistant. Even in southern Europe, business is only slightly down this year so far. It’s not a major problem. Now if you talk about fashion, we are more dependent on the weather. Maybe we should find a measure for the weather before we find a measure for the financial crisis!”
Gildo Zegna, ceo of the Ermenegildo Zegna Group:
“The euro will remain, and politicians will find a solution. We have the advantage of a weak euro, which helps grow our exports. I am optimistic that the European Union will remain, and we are tied to the euro. Newspapers contribute to the depression, but after all, the sector is holding up, and tourists compensate the weaker markets. That said, we must always be on the watch.”
Eric Maréchalle, Kenzo ceo:
“Europe needs to become a real federation, with economic equality and democracy. People will become aware of this gradually. Only five years ago, there was no talk of this. People need something new to be enthusiastic about. Europeans are so scared of losing what they already have. I’m optimistic. In the short term, we need to associate a new capacity to find funding with a federal government.”
Sidney Toledano, Christian Dior ceo:
“The debt problem needs to be resolved, because when we are in debt we cannot move forward.”
Peter Kriemler, ceo, Akris:
“Europe is not concerned enough about unemployment. In the United States, where unemployment is about 8 percent, this is the main subject among business leaders and workers. I feel better about the American situation, and I think they have a clear plan how to work out a long-term strategy, even if it will take many years. It might impose higher inflation for the future, and for the moment there will be more debt. In Europe, we have about 12 percent unemployment, and it will grow further, and yet we are still focused on debt reduction and austerity. Without some attention given to job creation, I don’t think we can get out of this situation very quickly.
“I fear we face many years of nongrowth and additional political and social problems. I’ve not yet seen a government address the fact that salary levels may need to be lowered as a measure to make European countries more competitive in a global, open marketplace. Somehow, we need to bring back the work. I suppose this can happen only with a major devaluation of the euro against the dollar or with an exit of the problem countries.”
Umberto Angeloni, ceo, Caruso:
“There cannot be, at the moment, fiscal unification, because that would take years and years and years, so there should be at least financial unification immediately. By that, I mean that there should be a common authority to oversee banks, to save banks, to ensure depositors of banks over the euro zone….That would stop a run on the banks and would take away from the single governments the task of saving their banks. So there should be a central authority that not only supervises but also supports and even buys, if necessary, banks. Secondly, there should be some sort of unification of debt….All of a sudden European debt would be the least risky.”
Christophe Navarre, ceo of Moët Hennessy:
“As a Belgian, in terms of both my upbringing and my convictions, I am a dedicated European. Like France and Germany, Belgium was one of the founders of what is now the European Union. There is no alternative than to find solutions to the current situation, in the sense that there is no possibility of going backwards. And that concerns both the euro and Europe itself.”
Franco Pené, chairman of Gibò SpA:
“To change the mood of the people is just as important as any other measure. If the consumer mood does not change, it will be a nightmare for many years. The southern part of Europe is, of course, in the worst situation, including Italy, but I think the problem today is affecting everybody, including Germany. [The outcome of the June 29 European Summit] is exactly what everybody was waiting for — you can tell from the reaction of the stock exchange.…The only way to find remedies is to move forward with a real European community.”
Jean-Claude Biver, ceo, Hublot:
“I believe in education. If you have a very powerful high-level educational system, you can develop imagination and creativity….People need to be instructed. This is true [in the U.S. and] in Europe, in every country where there is a high level of GDP.”
Bruno Sälzer, ceo, Escada:
“The key for me to improve the situation, or at least to be more sure about the future, requires a much more consistent way of communicating the ways in which to deal with the crisis. Right now, the plans change every two weeks. New information and new instruments are coming up constantly. People are first confused, but by the end of the day, they’re completely frustrated, which is worse. To overcome frustration with the crisis, what is said today has to match much more closely with what was said yesterday. People are looking for stability.”
Enrico Ceccato, ceo, Perfume Holding:
“In Europe, we need to work on the financial spread….Every country has its problems. Italy has structural problems: It’s composed of many small and medium-sized businesses, many of which don’t have succession plans and are not international enough to compete effectively. And unfortunately, many of those who run these businesses don’t support the political groups who would most benefit them.”
Celso Fadelli, ceo of Intertrade Europe, which creates market strategies for high-end artistic fragrance brands such as Eight & Bob, Agonist, Blood Concept, Byredo and Nasomatto:
“If Europe can’t learn to govern itself with unified political, fiscal and labor regulations, it will not be able to start developing again. Those who thought that a single currency and the expansion of the number of member countries were all that was needed had to reexamine their thinking at the first financial crisis. If Europe doesn’t become an integrated system of “united states” in short order — and not of related countries that behave with distrust, conflict, and opportunism — unfortunately, it won’t carry much weight in the long-term future, which needs a three-block scenario composed of Asia, America, Europe….The measures taken by some countries, including Italy, to invert [the crisis] have been too focused on the recovery of financial resources instead of on lightening the cost of government systems, which for years and years handed out jobs and raised public spending in exchange for votes and non-collective interests. I see the long-term scenario for Europe as worrisome, also keeping in mind the lack of dynamism in the “Old Continent,” that has never revealed the ability to react. For instance, the United States is always quick and open to major changes, when necessary, in a short amount of time.”