With Europe's economy expanding, there are opportunities, challenges and consequences for firms that are in or entering the region's markets, and that serve customers by phone and, increasingly, on-line.

The International Monetary Fund's (IMF) most recent World Economic Outlook, released in spring 2000, predicts the 15-nation European Union (EU) economy will expand by 3.2% in 2000 and by 3% in 2001, an increase over the EU's growth rate of 2.3% from 1999. The IMF expects that the 11 countries in Europe that agreed to use the euro as their currency will experience an average economic growth rate of 3.2% in 2000, up from 2.3% in 1999.

The European Commission (EC) is more optimistic. Its spring 2000 forecast says that the economies of the 15 countries in the EU and that the economies of the 11 countries in the euro zone will grow by 3.4% in 2000 and by 3.1% in 2001, up from 2.3% in 1999.

Better times have led to greater consumer confidence and to lower unemployment, according to the IMF, which predicts that jobless rates in the EU will decline from 8.9% in 1999 to 8.4% in 2000 and to 8.0% in 2001. The IMF expects that unemployment rates in the euro zone will decrease from 10.1% in 1999 to 9.4% in 2000 and to 8.9% in 2001.

The EC predicts that jobless rates in the EC will slide from 9.2% in 1999 to 8.5% in 2000 and to 7.9% in 2001. The EC anticipates that unemployment rates in the euro zone will plunge from 10% in 1999 to 9.2% in 2000 and to 8.5% in 2001.

Compared to its value at the time it was introduced in 1999, the value of the euro in relation to the dollar fell by 25% to around 89 cents as of early May 2000. Given that the euro's drop has expanded the market for European products, such as cars and other manufactured goods, the EC anticipates exports from the EU to increase by 8.6% in 2000. But Europe's improving economy may not necessarily translate into greater demand for products and services from the US, which could affect European demand for phone and on-line service and support from American firms.

Philip Cohen, principal with teleservices consultancy Philip Cohen AB (Skelleftea, Sweden), says he has not heard about any US firm not opening a call center in Europe on account of the low euro. He believes that the alternative of serving European customers from the US is not feasible due to the lack of foreign language skills, high costs and a booming economy in the US.

"There might be, if the decline continues, an indirect impact on the need for future US-owned call centers," Cohen speculates, "Currency is only one factor, and a small one at that, that goes into site selection. There are many more important ones, like labor." The United Kingdom (UK) has the largest economy outside of the euro zone, and it is Europe's most popular call center location. The IMF predicts that the UK's economic growth rate will expand from 2% in 1999 to 3% in 2000 and back to 2% in 2001. The EC predicts an economic growth of 3.3% in 2000 and 3% in 2001, up from 2% in 1999.

The IMF says unemployment in the UK will slip from 4.4% in 1999 to 4.3% in 2000 and will then rise slightly to 4.5% in 2001. The EC expects that unemployment figures for the UK will decrease from 6.1% in 1999 to 5.8% in 2000 and to 5.6% in 2001.

Philip Cohen doesn't think that Britain's decision not to be part of the euro zone has significantly hurt it as a location option. Alistair Davies, site selection director with Deloitte and Touche's London office, agrees. "If the current position of the pound and the euro stays for the next 12 months or so, then it may have a site selection impact."

European Leaders Loosen Controls, Promise Job Growth

European countries are acting on their own to create more growth and attract investment. Germany, for example, may abolish laws that require most German stores to close at 4 pm on Saturdays and remain closed on Sundays.

Retailers that do business in Germany, including those that manage Web sites and telemarketing operations, are challenging laws that do not allow them to offer unlimited money back guarantees and that limit the number and type of discounts they can offer. Lands' End, for example, is waging a campaign against Germany's restrictions, according to an April 8, 2000 article in the Financial Times (FT).

The FT reported on February 17, 2000 that Philips and Sony won court injunctions that barred Primus Online from selling at a discount in Germany. "Things have come to a point where we are seriously considering moving to a less regulated country, such as the Netherlands and Belgium," says Primus' managing director Frank Bohmann.

It is not clear what impact fiscal and government reforms will have on call center site selection in Europe. But Cohen points out that countries such as Germany and France are large markets in their own right and they have professional economic development agencies (EDAs) that assist firms with opening new locations.

France, for example, has a national agency called Invest in France (Paris, France) that works with local EDAs. And although there is no German counterpart to Invest in France, certain states and regions in the country, such as Bavaria, Bremen, the former East Germany, Nordrhein-Westfalen and the Saarland, have excellent EDAs interested in attracting call centers.

"As a general rule, if a majority of your customers are in Germany you have to be in Germany," says Cohen. "If a majority of your customers are in France, then you should be in France."

Increased economic activity in Europe, commercial deregulation in the region and the efforts of European countries to generate more growth in the knowledge-based sector appear to be positive developments for Europe's call center industry. The Emerging Contact Technology Survey, a report by the research firm Datamonitor (London, UK), predicts that European call center managers expect to double the number of agents they employ by 2003.

Consequences of Labor ShortagesThe good times have their downside in that they consume a lot of labor. Yet although the demand is tight for workers, upward wage pressure is still very low. The FT reported on January 11, 2000 that average wages across the EU are expected to rise by only 2.5%.

As in the US, low unemployment, high labor demand and shortages exist mainly in the major metropolitan areas, such as Amsterdam, the Netherlands; Dublin, Ireland; London, England; and in prosperous regions such as northern Italy and southeastern England.

The dilemma facing European governments is that demands for skilled labor are rising when many Europeans are out of work. European heavy industry and mining firms have been downsizing, laying off many workers. This has led to a gap between the skills needed and the skills available. Germany, for instance, has a shortfall of 75,000 IT workers even though the country has more than four million people who are unemployed.

With Europe's economy expanding, there are opportunities, challenges and consequences for firms that are in or entering the region's markets, and that serve customers by phone and, increasingly, on-line.

The International Monetary Fund's (IMF) most recent World Economic Outlook, released in spring 2000, predicts the 15-nation European Union (EU) economy will expand by 3.2% in 2000 and by 3% in 2001, an increase over the EU's growth rate of 2.3% from 1999. The IMF expects that the 11 countries in Europe that agreed to use the euro as their currency will experience an average economic growth rate of 3.2% in 2000, up from 2.3% in 1999.

The European Commission (EC) is more optimistic. Its spring 2000 forecast says that the economies of the 15 countries in the EU and that the economies of the 11 countries in the euro zone will grow by 3.4% in 2000 and by 3.1% in 2001, up from 2.3% in 1999.

Better times have led to greater consumer confidence and to lower unemployment, according to the IMF, which predicts that jobless rates in the EU will decline from 8.9% in 1999 to 8.4% in 2000 and to 8.0% in 2001. The IMF expects that unemployment rates in the euro zone will decrease from 10.1% in 1999 to 9.4% in 2000 and to 8.9% in 2001.

The EC predicts that jobless rates in the EC will slide from 9.2% in 1999 to 8.5% in 2000 and to 7.9% in 2001. The EC anticipates that unemployment rates in the euro zone will plunge from 10% in 1999 to 9.2% in 2000 and to 8.5% in 2001.

Compared to its value at the time it was introduced in 1999, the value of the euro in relation to the dollar fell by 25% to around 89 cents as of early May 2000. Given that the euro's drop has expanded the market for European products, such as cars and other manufactured goods, the EC anticipates exports from the EU to increase by 8.6% in 2000. But Europe's improving economy may not necessarily translate into greater demand for products and services from the US, which could affect European demand for phone and on-line service and support from American firms.

Philip Cohen, principal with teleservices consultancy Philip Cohen AB (Skelleftea, Sweden), says he has not heard about any US firm not opening a call center in Europe on account of the low euro. He believes that the alternative of serving European customers from the US is not feasible due to the lack of foreign language skills, high costs and a booming economy in the US.

"There might be, if the decline continues, an indirect impact on the need for future US-owned call centers," Cohen speculates, "Currency is only one factor, and a small one at that, that goes into site selection. There are many more important ones, like labor." The United Kingdom (UK) has the largest economy outside of the euro zone, and it is Europe's most popular call center location. The IMF predicts that the UK's economic growth rate will expand from 2% in 1999 to 3% in 2000 and back to 2% in 2001. The EC predicts an economic growth of 3.3% in 2000 and 3% in 2001, up from 2% in 1999.

The IMF says unemployment in the UK will slip from 4.4% in 1999 to 4.3% in 2000 and will then rise slightly to 4.5% in 2001. The EC expects that unemployment figures for the UK will decrease from 6.1% in 1999 to 5.8% in 2000 and to 5.6% in 2001.

Philip Cohen doesn't think that Britain's decision not to be part of the euro zone has significantly hurt it as a location option. Alistair Davies, site selection director with Deloitte and Touche's London office, agrees. "If the current position of the pound and the euro stays for the next 12 months or so, then it may have a site selection impact."

European Leaders Loosen Controls, Promise Job Growth

European countries are acting on their own to create more growth and attract investment. Germany, for example, may abolish laws that require most German stores to close at 4 pm on Saturdays and remain closed on Sundays.

Retailers that do business in Germany, including those that manage Web sites and telemarketing operations, are challenging laws that do not allow them to offer unlimited money back guarantees and that limit the number and type of discounts they can offer. Lands' End, for example, is waging a campaign against Germany's restrictions, according to an April 8, 2000 article in the Financial Times (FT).

The FT reported on February 17, 2000 that Philips and Sony won court injunctions that barred Primus Online from selling at a discount in Germany. "Things have come to a point where we are seriously considering moving to a less regulated country, such as the Netherlands and Belgium," says Primus' managing director Frank Bohmann.

It is not clear what impact fiscal and government reforms will have on call center site selection in Europe. But Cohen points out that countries such as Germany and France are large markets in their own right and they have professional economic development agencies (EDAs) that assist firms with opening new locations.

France, for example, has a national agency called Invest in France (Paris, France) that works with local EDAs. And although there is no German counterpart to Invest in France, certain states and regions in the country, such as Bavaria, Bremen, the former East Germany, Nordrhein-Westfalen and the Saarland, have excellent EDAs interested in attracting call centers.

"As a general rule, if a majority of your customers are in Germany you have to be in Germany," says Cohen. "If a majority of your customers are in France, then you should be in France."

Increased economic activity in Europe, commercial deregulation in the region and the efforts of European countries to generate more growth in the knowledge-based sector appear to be positive developments for Europe's call center industry. The Emerging Contact Technology Survey, a report by the research firm Datamonitor (London, UK), predicts that European call center managers expect to double the number of agents they employ by 2003.

Consequences of Labor ShortagesThe good times have their downside in that they consume a lot of labor. Yet although the demand is tight for workers, upward wage pressure is still very low. The FT reported on January 11, 2000 that average wages across the EU are expected to rise by only 2.5%.

As in the US, low unemployment, high labor demand and shortages exist mainly in the major metropolitan areas, such as Amsterdam, the Netherlands; Dublin, Ireland; London, England; and in prosperous regions such as northern Italy and southeastern England.

The dilemma facing European governments is that demands for skilled labor are rising when many Europeans are out of work. European heavy industry and mining firms have been downsizing, laying off many workers. This has led to a gap between the skills needed and the skills available. Germany, for instance, has a shortfall of 75,000 IT workers even though the country has more than four million people who are unemployed.