Spring & the Eurozone

As we close out the first quarter of the new calendar and fiscal year, almost all businesses are finding that their year-over-year performance has improved significantly. The first quarter of ‘09 represented the depth of the Great Recession, when the world as we knew it unraveled before our eyes. When earnings are released for the first quarter of ‘10 we will see, without exception, improvements in all sectors of the business media, including those newspapers that survived the downturn. This will provide momentum for continued improvement as we head into spring and leave behind a difficult winter on the east coast.

Mary Claire and I returned last week to Blackhawk for the first time since early January. The Bay Area’s spring is in full bloom. Spring shipments from Napa and Sonoma are arriving, most from the ‘07 vintage. As many wine critics have reported, ‘07 represents the best vintage for most varietals in Northern California wine country since ‘97. It is time to restock the wine cellar, with many wineries actually lowering their prices to reflect the reset that has taken place in the consumer economy!

While we continue to see the U.S. and U.K. economies recover and grow, albeit at slower paces than we saw in the fourth quarter of ‘09, the eurozone remains challenged by its PIIGS. ”Greece, along with Portugal, Ireland, Italy and Spain, are Europe’s PIIGS - euro-zone members with fragile economies and large debt loads. Fitch Ratings poured fuel on the euro fire last week by downgrading Portugal’s long-term foreign- and local-currency debt to a notch, to double A-minus, with a negative outlook, meaning another downgrade is more likely than not. The euro promptly fell to 10-month lows against the dollar before rebounding Friday.” (“Helping Hand for Greece Also Helps Hedge Funds,” Barrons, March 29, 2010) Those of us who have business interests in the eurozone will continue to monitor the German-French brokered deal to keep Greece from defaulting. I was surprised to see Chancellor Merkel prevail on the side of fiscal discipline and the IMF being invited to join the bailout of Greece in order to preserve the Euro.

I wrote back in September of ‘07 in Global Brands, “In our global economy, even proud islands like the UK need to acknowledge that we all operate in a very interconnected world. Will the pound some day give way to the Euro?” I stand corrected; the Pound Sterling will survive and will continue to show strength versus the Euro. I was much closer to the mark in my last post, The Pound Sterling. We will continue to watch with great interest the upcoming spring election battle of Labour vs. the Tories. Closer to home and after our long health care debate, I recommend you read “Game Change: Obama and the Clintons, McCain and Palin, and the Race of a Lifetime,” by John Heilemann and Mark Halperin.