The FINANCIAL — On the eve of European Parliament elections, new research from Grant Thornton reveals that despite the economic problems caused by the sovereign debt crisis, support for the euro amongst business leaders remains strong.
The FINANCIAL — On the eve of European Parliament elections, new research from Grant Thornton reveals that despite the economic problems caused by the sovereign debt crisis, support for the euro amongst business leaders remains strong. However, support for further European integrationappears to be waning in France and Germany, the architects of the EU project. As the right-wing, anti-EU parties have made significant gains in the European Parliament, a decline in business support represents a challenge to hopes for a more united Europe following the sovereign debt crisis.
The findings, drawn from Grant Thornton’s annual Future of Europe report, show that 93% of businesses in the eurozone area want to see the euro survive and three in four (75%) say that entry into the single currency has benefited their organisation. Business optimism has also risen across the eurozone from 8% to 25% over the past three months.
Due to recent political uncertainty, business optimism has fluctuated in Georgia, from 26% in Q2 2013 to 56% in Q3 2013.More recently, business optimism has hovered around a modest 42%.According to Nelson Petrosyan, Director at Grant Thornton Georgia, “political uncertainty has not translated well into the business sector. Businesses remain cautiously optimistic about the future.”
On the foreign front, businesses in Georgia exhibit strong confidence in the potential benefits of Georgia’s integration with the EU. The sovereign debt crisis has dampened the attractiveness of the EU for non-EU members. Percentage of non-EU businesses that think further integration with the EU would benefit their business has dropped to 41%, down 21 points from 2012. However, Georgia is partly immune to this development. Only 15% of businesses believe that that the sovereign debt crisis has had a negative impact on the attractiveness of the EU.
Nelson Petrosyan stated: “While the sovereign debt crisis might have damaged the attractiveness of the EU to other non-EU member, businesses in Georgia exhibit solid enthusiasm for further economic integration with the EU.”As Georgia prepares to sign the DCFTA,a strong majority of businessessupport closer ties with the EU. According to recent estimates, 67% of businesses in Georgia believe that integration with the EU would benefit their company.
Georgian business support for closer integration with the EU is at growing odds with business attitudes in the EU, especially in France and Germany. The EU has become increasingly sceptical of member-state integration, let alone expansion. When askedwhether they would like to see further integration between member states, businesses in France and Germany were markedly less positive compared with this time last year: in Germany, 55% of firms are now open to further economic integration, down 20 percentage points from this time last year;in France, support has dropped 12 percentage points to 57%.
Similarly, support for further political integration in Germany has fallen from 61% in 2013 to 53% this year, and in France from 35% to just 22%. The proportion of business leaders in France and Germany who do not want to see any further European integration have risen by 9 and 12 percentage points respectively.
Scott Barnes, CEO of Grant Thornton UK LLP, commented:“The results show that the vast majority of business leaders in the eurozone remain committed to the success of the single currency as the region ramps up its recovery from the sovereign debt crisis.
"However, they are less sure about further integration – particularly in France and Germany, whichhave historically been the driving forces behind the EU project.Together these economies account for nearly half of eurozone GDP and despitevastly different economic performances since the financial crisis, they are now united by a loss of faith in further integration. The cooling of support may be symptomatic of the toll of propping up the eurozone through the sovereign debt crisis, and indicative of a wariness of further integrationplacing an even greater burden on their economies.
“At a time when the regional recovery is still fragile, further EU reforms, such as the banking union, still in their infancy and the rise of anti-European sentiment spelled out in last month’s elections, it’s a concern that the current balanced integration doesn’t seem to be serving the business communitiesof two of its biggest member states very well.”
The IBR also reveals that while business support for further EU integration has wobbled in France and Germany, it is picking up elsewhere. Support for greater economic integration is increasing in a number of economies including Ireland (50% last year to 77% this year), Poland (54% to 67%) and Italy (56% to 61%). In Ireland, 95% of businesses are now open to further integration, up from 68% this time last year.
Scott Barnesadded:“There’s no doubt that the picture across Europe is much brighter now than it was twelve months ago. However, the recovery is fragile – Europe is not out of the woods just yet. Deflation is a growing concern, as is the plight of youth unemployment which is still unacceptably high. The situation in Ukraine is also creating uncertainty. Against this backdrop, a loss of support at the heart of Europe’s business community is to be avoided at all costs if growth is to continue and the region is to strengthen.
“With EU reform high on the agenda for policymakers, it is vital listen to the views and concerns of businesses and work together to secure a prosperous future for Europe.”
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