Before joining Gartner I spent a few years at the European Commission, where I was lucky enough to work on one of the most exciting projects at the time, which was the implementation of the single European currency. I was tasked with helping understand and prepare for the IT impact of the change, ranging from changing base currency in core systems to updating thousands of ATMs, from dealing with historical data to planning for boundary dates and related business continuity. The timeframe for this massive migration largely overlapped with the changes required to avert the Y2K (or millennium bug) problem, making the whole problem even more interesting.
At the time, I would have never thought that so many countries would join in such a short period of time, nor that anybody would be questioning the very existence of the euro. My understanding of the treaties is that there is no negotiated way out of the euro, so if one or more countries need to drop off, the way to make it happen is not planned or prescribed yet.
We have been observing the current situation unfolding for the last year or so, since when countries like Greece, Portugal, Spain and Ireland asked for support from the EU and the IMF. However the real turning point has been the worsening of the situation with the sovereign debt in Italy, which is the third largest economy in the EU and whose financial default may create consequences that were unthinkable just a few months ago.
It is quite clear that the severity of the situation goes beyond an impact on financial markets and investment firms, and can affect virtually any single enterprise in the planet, as the shockwaves of a euro collapse would be felt in every corner of the world, due to how interconnected financial markets and supply chains are today. Even countries that have been experiencing a healthy growth over the last few years – such as China, Brazil or Australia – would be vulnerable to the inevitable contraction in consumption and trade in countries that are directly affected by a euro collapse.
There are multiple reverberations for CIOs and other IT leaders in most, if not all, industries and in all geographies. This is why my colleague David Furlonger and I have decided to start looking into this as a matter of urgency.
David covers banking and investment services and I do cover government, presumably two of the industries that are most immediately concerned with the impact of a partial or total euro collapse: this is why we are leading the charge on this. We just published a first research note for our clients (login required)
This is just the starter though. Nobody knows exactly what is going to happen, so the only way to deal with this level of uncertainty is by using scenario planning techniques. David and I are developing four alternative scenarios, ranging from the survival of a stronger euro to its complete meltdown, passing through two intermediate scenarios where either few or several countries drop out of the euro. Several Gartner analysts are developing research notes that explore the impact of each scenario on the industry or technology topics they cover.
Over the next few weeks there will be a stream of research notes that relate to the euro crisis and provide advice about what to do in each of those four scenarios. We are also planning for a webinar that should take place in January.
I will be publishing regular updates on this blog about new research material published in the topic, in order to flag it to our clients. Stay tuned!