German Austerity v. Europe's Luxury Lobby
Is the European economic paradox such that the luxury sector is the best hope for relaunching the moribund economy?
By Florian Eder
BERLIN - Whether it's France's President travelling by train, or Italy's top tailors predicting more tough times ahead for their sector – the European paradigm right now, voluntary or imposed, is German austerity.
European luxury brands are increasingly worried that they are about to be crushed by said paradigm. In times like these people think it is inappropriate to spoil themselves, and politicians have so much else on their plate that they have little inclination to listen to the needs and worries of companies that earn a living making beautiful, expensive things.
Yet according to Armando Branchini, head of the European Cultural and Creative Industries Alliance (ECCIA): "By 2020, our sector will have contributed 900 billion euros to the European economy and employ up to 2.2 million people – assuming we have the right framework for growth."
The luxury sector is insisting that the added value factor it brings to Europe should be recognized but also appreciated. A recent study conducted for ECCIA by consulting firm Frontier Economics concurs: "It's easy to overlook the importance of the sector to Europe's economy."
Luxury labels are hoping the results of their study will deliver as much solace to an embattled Europe as their stylish accessories, yachts and sports cars, deliver pleasure to their buyers. The turnover today is, after all, 440 billion euros and half million jobs. The sector grows every year; the projected rate for next year is of 7% to 9%.
The study also points out that the luxury sector does a lot for Europe's image. Whether it is footwear or clothes, wine or watches, anybody who wants the best will buy from European brands, which account for 70% of the world luxury goods market.
A luxury wish list
ECCIA also uses the study to make four key demands -- and its authors have come up with dire scenarios for Europe, were these demands not met.
The first demand is for the removal of various constraints the sector presently faces when dealing with developing countries such as India, China or Brazil. The second demand concerns alcohol – producers of fine spirits consider themselves to be part of the luxury sector. Conditions for the sale of alcohol are expected to get tougher, which would mean a 20% decrease in turnover and 190,000 jobs lost. The third demand is for better protection from counterfeit goods: if nothing is done, a further 180,000 jobs will be lost.
The fourth demand is one that is shared by just about everybody in the manufacturing world: cheaper labor. Even though, the study says, part of the magic of European-made luxury goods lies in the high levels of skill and traditional craftsmanship they represent, these skills must cost less. If costs rise by another 10%, another 27,000 jobs could be at risk.
The study made an immediate impact on at least one decision-maker: after its presentation the Vice-President of the European Commission responsible for Industry and Entrepreneurship, Antonio Tajani – who like many high-end labels is Italian – stated that he would launch a relevant initiative "by the end of this year."
Read the article in German in Die Welt.