Jeremy Warner's Outlook: Germany prepares for unthinkable? Not yet, but it may have to if attitudes don't change

<preform>Conferencing: an unlikely growth story</br> Emap takes aim at Scottish Radio</preform>
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The euro was unnerved yesterday by a magazine report that the German finance ministry and the Bundesbank are already contemplating how to respond to the previously unthinkable - the collapse of monetary union. The report was immediately denied, but it is indicative of the fragility that exists in currency markets post the French "non" that for a while it was taken quite seriously, and it certainly makes my own hitherto sanguine view of the likely market fall-out from the death of the European constitution seem open to question.

The euro was unnerved yesterday by a magazine report that the German finance ministry and the Bundesbank are already contemplating how to respond to the previously unthinkable - the collapse of monetary union. The report was immediately denied, but it is indicative of the fragility that exists in currency markets post the French "non" that for a while it was taken quite seriously, and it certainly makes my own hitherto sanguine view of the likely market fall-out from the death of the European constitution seem open to question.

Of course, it would be utterly astonishing if the German authorities did not have a contingency plan for the collapse of the euro. This is the sort of thing that central bankers and civil servants are paid to plan for. A bit like nuclear war, nobody expects it to happen but we would surely wonder why we have a government at all if it turned out nobody had bothered to think about what to do if it did.

The more concerning aspect of the Stern magazine story, again denied, is that the German government is planning to blame the euro for Germany's economic malaise. They've blamed just about everyone else, from the locusts of Anglo-American capitalism to European enlargement, so why not the single currency too?

Yet not even Gerhard Schröder, with defeat looming in the general election, could be that cynical. To turn round and damn a project which up until now he has been the main cheer leader for would surely lose him any remaining support he might have. You don't, in any case, need to be a trained economist to know that the euro is not the root cause of Germany's problems. The interest rate set by the European Central Bank for the European economy as a whole is undoubtedly too high for the stagnant German economy, but it is arguable what effect yet lower rates still would have on an economy where domestic demand is so subdued.

Would Germany be better off without the single currency? According to the polls, that's what a growing number of Germans believe, for they look back to a supposedly golden age of economic prowess that existed before the euro was introduced and draw a connection. This is a not unreasonable thing to do, but it is also largely a delusion.

Those of us in Britain who have supported the single currency have tended to do so in the belief it would galvanise Europe into free market economic reform. Indeed it is hard to see how the euro can ever properly work if this does not occur. As a collection of essentially national economies, each with their own employment and industrial protections, the euro is doomed to division and failure. It is only if the full force of industrial and labour market competition is unleashed on these economies that a single currency becomes economically sustainable and politically acceptable.

The French no was a vote against precisely this kind of vision. Europe seems intent only on looking backwards to a past ideal which never really existed as Continentals seem to believe it did and in any case is unachievable in a fast changing world. The euro is not yet a doomed project, but it will be if attitudes don't change.

Conferencing: an unlikely growth story

What is it about conferences that makes them such a growth industry? We all know the attractions - a couple of heavy drinking days out of the office, sometimes in an exotic location, with little in the way of work expected out of the participant, and if he/she is really lucky, the possibility of romantic adventure with a colleague or competitor away from the prying eyes of partners.

It is much harder to see the point of them from the employer's point of view, even when they are dressed up as "training" or "performance improvement", yet so far that doesn't seem to have undermined their raison d'être. Everyone's got a conference these days, right down to the annual convention of canned vegetable manufacturers of Great Britain, and for the conference organisers it can be a hugely lucrative line of business.

Just ask the Tory peer and party donor, Irvine Laidlaw, who yesterday sold his conferencing business, the grandly named Institute for International Research (IIR), for a jaw dropping $1.4bn. The great bulk of this goes straight into Lord Laidlaw's bank account, as he still owns 90 per cent of the company. This he built from small beginnings over three decades in the spiritual home of the annual convention - the United States.

The buyer is T&F Informa, sometimes referred to as a mini-Reed Elsevier on account of its interests in business and scientific publishing but also already quite big in US conferences. Normally an acquisition of such size in the shark infested waters of American commerce would cause dismay in the City, yet remarkably, given the accompanying 2-for-5 rights issue, this one prompted a 6.5 per cent rise in the T&F share price.

In part this is because the City is already reasonably familiar with IIF. Lord Laidlaw tried to float it back in 2001 but was derailed by 11 September. T&F faced fierce competition from private equity for the company, but this should be seen rather as a sign of its attractions than of T&F being forced to overpay. The beauty of conferencing is that once the event is established it becomes a recurring income source, rich in cross promotional opportunities for T&F's magazine and online publishing interests.

So although conferences remain a highly cyclical business, T&F's Peter Reed seems to have pulled off a corker of an acquisition. At just over two times sales, the price is steep but not off the scale. Anyone for the plastic extrusions and moulding annual convention? No? By the way, the location is Barbados. Now let's form an orderly queue, shall we please.

Emap takes aim at Scottish Radio

After Capital Radio's merger with GWR, it was only going to be a matter of time before Emap, the number three in the commercial radio sector, moved in on Scottish Radio Holdings, where it has held a 27 per cent stake for more than a year. Consolidation always breeds more consolidation, lest rivals get left behind.

Given this backdrop, Scottish Radio reckons it should command a corresponding premium and is playing hard to get. It makes an interesting stand-off, especially as Emap, which is as much a publishing house as a radio broadcaster, has no head of radio right now and Scottish Radio's well regarded management would neatly fill the void.

Consolidation can only go so far in solving an industry's problems and the more interesting question, perhaps, is why commercial radio as a whole continues to do so badly.

The BBC is still utterly dominant in the radio landscape, with about 54 per cent of the market and growing, in marked contrast to TV, where the BBC's audience share is nowadays little more than 30 per cent. This is despite the fact that the fragmentation that has so damaged the BBC's TV market share has been a reality in radio for far longer than in TV. The advent of digital radio has failed to generate the same level of excitement and innovation as it has in TV.

One possible reason for this is that advertising on radio is a good sight more invasive, repetitive and irritating than it is on TV, making many commercial radio stations a turn-off. There is no obvious solution to this disadvantage, as the only significant source of commercial radio revenue is advertising.

Much of the "competition" provided by the BBC is also unfair, in the sense that there is no reason to believe the market wouldn't provide it if the BBC wasn't there. This is certainly true of Radio One and Two, and much local radio besides, if not Radio Three and Four. Yet in many cases commercial radio has also also failed to provide a compelling enough alternative to licence fee funded radio. Consolidation won't of itself solve this problem.

j.warner@independent.co.uk

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