A leading Citicorp executive is bullish on the prospects for a united European economy despite the many challenges that have skeptics predicting the union of nations will collapse.
"Europe is going to be a substantially more dynamic economy than it's ever been before," said Ian Cormack, Citicorp's global head of investment industry, during a presentation for reporters this week.
While much press attention has begun focusing on next year's introduction of a common European currency, the euro, Mr. Cormack argued that the more important development is a set of broad economic changes that will provide increased business opportunities.
The factors driving that transformation include the privatization of government-run businesses and pension funds and the emergence of many start-up technology companies.
These trends are in turn creating opportunities for Citicorp and other U.S. and European banks, primarily in areas such as securities underwriting, mergers and acquisition advice, and money management.
"The currency is the last dot at the end of the sentence," said Mr. Cormack, who is based in London. "In order to get to that point, Europe is going through a fundamental transformation of its political and economic and financial infrastructure."
Nonetheless, there are many in Europe who feel that a host of impediments lie in the way of a unified economy. These obstacles include the absence of political unity and the maintenance of strong labor unions that burden companies with high labor costs and an inability to lay off employees at management's discretion.
While Mr. Cormack conceded these obstacles, he said he believes that the liberalization of capital markets will in time lead to a breakdown in the Continent's inflexible labor markets.
Because companies would be able to pick up and move to parts of Europe with more favorable labor environments, he argued, local political and labor leaders will be more inclined to dismantle decades of burdensome labor practices.
"Most European politicians have figured out that there is an interesting correlation between high protection of labor and high unemployment," he said.
"Both markets and labor are freeing themselves up, and they will have to if Europe is to keep up with the" United States.
Mr. Cormack said he is sanguine about the near-term future of Europe in spite of economic turmoil throughout much of East Asia and the slowdown in Latin America.
"Clearly some of their rates of growth may slow a bit because some of their export markets will be affected," he said. "But if anything, it's a positive. You will have the world's largest economy with a pretty stable currency.
"It's going to be attracting, not losing, capital," he said.
