Economist on euro: U.S. agents, clients will gain

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AUDIO: The speech referenced in the article below and other speeches from Travel Weekly's Euro Conference are available in their entirety, exclusively on Crossroads.

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NEW YORK -- The economic growth that the euro should bring to Europe will also benefit the U.S., a noted economist told euro conference attendees.

Zanny Minton BeddoesThe keynote speaker of the conference luncheon, Zanny Minton Beddoes, Washington correspondent for The Economist magazine and former economist for the International Monetary Fund, said, "Europe will grow faster and Americans will be better off, too," because American exporters as well as American investors will benefit from higher demand.

"To the extent that the euro increases U.S. economic growth, it will clearly benefit the U.S. travel industry," she said. "A faster-growing economy and higher corporate profits, after all, mean higher disposable income." The adoption of the euro will make it "not only cheaper but considerably easier for the typical U.S. traveler in euroland," according Beddoes. Euroland -- a nickname for the economic zone comprised of 11 western European countries -- is scheduled to kick off Jan. 1, an event that will create an entity rivaling the U.S. in size and financial might.

Although some details of how the new system will work still are unclear -- the dollar-euro exchange rate won't be set until Jan. 1 -- the general sense is that the euro's introduction will have more pluses than minuses for the U.S. travel trade, Beddoes said.

Among other things, Beddoes predicted that there could be some restructuring in European travel businesses due to the creation of one economic system. "You're already facing substantial pressure from the Internet and from the whole innovation that that brings," she said. "In Europe that will be exacerbated by this euro-induced restructuring. The overpriced and inefficient agent in France will face competition from his niftier Spanish colleague. And I would think that would offer many opportunities for nifty U.S. travel agents wishing to move into this market."

For travelers, too, there are "obvious benefits" deriving from the new currency that travel agents can tout to their clients. The most tangible advantage is the elimination of multiple currency transactions -- the fees for which can be substantial, depending on the number of countries visited and the amount of money being changed.

Of course, not all predictions are positive, Beddoes noted. The dollar-euro exchange rate will fluctuate on world markets, just as the dollar does against other currencies. If the dollar weakens in relation to the euro, then the cost of a European vacation will go up for U.S. consumers. She said that volatility in the exchange rate would be worse than a gradual weakening of the dollar's value vs. the euro.

The effects of the euro will be felt well beyond the borders of the 11 euro zone countries, said Beddoes. A number of eastern European countries are "clamoring in the doors," and "even if they're not yet members, they will tie their currencies to the euro. That will broaden the whole notion of 'euroland' very quickly."

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  • Zanny Minton Beddoes, The Economist
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