Brand Finance ® Brand Stories Euro Blues

Nat ion Brands 100

When it was launched in 2002 the Euro was discussed as a future replacement for the US dollar as a global reserve currency, discussions in 2011 centred on whether or not the single currency could survive. The 17-member Eurozone stumbled from crisis to crisis in 2011, as Greece, Ireland, and Portugal all required bailouts and international markets lost faith in Italy. Repeated attempts to get the situation under control have only chipped away at confidence in the ability of European leaders to unite to save their currency.

Europe’s immediate problems are relatively simple to understand, but have proved incredibly difficult to fix. Unsustainable debt in a few countries (notably Greece and Ireland, but possibly Italy or Spain) is causing markets to fear the solvency of EU governments. Since defaults in Greece or elsewhere would also bankrupt their North European creditors, the EU as a whole cannot afford the collapse of even its weaker members. Europe is four bailouts and one “comprehensive solution” into the crisis,and is not any closer to a solution. This process has now led to the replacement of two European governments; with both Italy and Greece forced to change prime ministers in an attempt to regain the markets’ confidence.

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euro Blues

© Brand Finance plc 2011

© Brand Finance plc 2011

It would be a mistake, however, to date the beginning of Europe’s economic woes to Greece’s first bailout in 2010. Europe’s unemployment has only been below Britain’s current rate for 7 fiscal quarters in the past 10 years, with a shocking 20% of 15-24 year olds not in jobs or education. The currency zone’s economic growth will be 1.6% in 2011, and this may fall to.5% in 2012. Fully two thirds of Europeans believe their economy is going in the wrong direction.

The on-going Euro crisis caused the national brands of Eurozone countries to lose $600 billion in brand value. European nations represented 7 of the 10 worst performing nation brands. European nations that were once known for efficiency and quality design are becoming bywords for economic incompetence and political confusion. Germany is the one major outlier, its position as lender of last resort has solidified its role as the stable and respectable leader of Europe. Even the stronger brands of Europe, though, risk being contaminated ifthedebtcrisiscontinues, if“Europe”asabrandloses value then the entire continent will suffer. Perceptions that Europe as a whole is unstable or – worse – that the EU itself is the cause of the crisis in its member states could harm brands all across Europe. Italy, the largest country to face

the possibility of a debt crisis, has seen its brand equity fall from an A to a BB over the last four years as successive governments have failed to deal with the country’s structural weaknesses. Even France, which has one of the most valuable brands in the world, has seen sharp falls in its brand strength. Damage to Europe’s collective “unionbrand”challengesEuropeannationswhicharelessaffected by the crisis to work harder to differentiate themselves from their troubled neighbours. The Nordic and Eastern EU states, especially, will have to make an effort to present themselves as Europeanoutliersratherthan“goodEuropeans.

The Economist Intelligence Unit estimate a 35% chance that one or more countries will leave the Euro, and outcome that Swiss investment bank UBS reports could lead to corporate default, recapitalization of the banking system, a collapse of international trade, and – probably – civil disorder and political crisis. As the crisis continues to unfold, the question is how lasting the damage from this year’s economic and political turmoil will be on Europe’s nation brands.

38© Brand Finance plc 2011

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