Saturday, September 09, 2000

Euro slide continues

Tours cheaper; exports aren't

By Jeff McKinney
The Cincinnati Enquirer

        For those considering a European trip, now could be the time to go.

        The weakening euro is great for American consumers and tourists, allowing them to buy goods there much cheaper than a year ago.

        Political unrest and a troubled European Union have caused the currency to slide almost 30 percent against the dollar since its January debut, offering more bargains for Americans traveling abroad.

        But the declining euro is bad news for U.S. companies exporting products to Eu rope as those goods become more expensive, possibly meaning less revenue and lower profit. It's also a drain on American companies operating in Europe, such as Procter & Gamble, because the declining euro is cutting into receipts from the continent.

        The euro's latest skid came this week after German Chancellor Gerhard Schroeder was quoted Monday as saying, “I don't want to be long,” or own a lot of euros.

        A strong dollar is one of the spillover effects of rising U.S. interest rates. The Federal Reserve has implemented six increases since June 1999 to slow a robust U.S. economy.

        The weakening euro means that Americans will have more buying power in Europe for everything from hotel rooms to restaurant meals to even buying a BMW, said Sheila Spradlin, international sales manager at Fifth Third Bank.

        “The euro's slide against the dollar means that your money would go a lot farther than it did before,” she said. “As long as the devaluation of the euro lasts, it's a trend that should continue.”

        John Morley, vice president of AAA Corporate Travel Services, the city's largest corporate travel agency, also said the decline means terrific bargains for Americans traveling to the 11 nations that use currencies tied to the euro.

        He estimated it would cost Americans about 25 percent less now to travel to places such as Ireland than a year ago. He said that's because the exchange rate in that and other Euro nations, including Britain, Germany and Italy, is 10 percent to 30 percent lower than last September.

        “This is really great for leisure travelers because they could see some good bargains as long as this lasts,” he said.

        But for U.S. companies, the weakening euro could mean a reduction of exports to Europe because products become more expensive in the local currency. Cincinnati is the nation's 20th-largest exporting city and Ohio's largest exporter. Europe is Cincinnati's largest trading partner, followed by Canada and Mexico.

        Rene Thomas, international marketing manager at the Greater Cincinnati Chamber of Commerce, said the devaluation could decrease Ohio exports to Europe. She esti mated that more than 2,000 Cincinnati companies export products and goods there.

        But she said Ohio exporters have no need to panic unless the weakening euro becomes a long-term problem.

        “There's nothing to get alarmed about now because we don't know how long this will last,” Ms. Thomas said.

       The Boston Globe contributed.


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