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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.
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.
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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!”