the global investor summit rome 2024

Europe’s Path to Revival

Understanding Europe has never been a simple task. It remains
a patchwork of distinctive cultures and languages, with tensions
between national and trans-national identities emerging at amoment when shared challenges, not least Russia’s invasion ofUkraine, require a cohesive response. Aging demographics andsluggish growth have at times served to disguise the continent’s
many economic strengths, which can go underappreciated.
At Bank of America’s recent Global Investor Summit in Rome,some of Europe’s most prominent political and business minds
made the point that it was time for a full-scale reassessmentof the continent’s policies and prospects.

Acknowledging tensions
The difficulties Europe faces are readily apparent. The invasionof Ukraine and consequent sanctions on Russia have draggedon growth, most notably in the form of higher energy prices andthe need to secure alternative energy sources.
At the same time, many EU countries have seen populist parties
rising in the polls, presenting a challenge to the unity needed topush progress on important Europe-wide political, economic andpolicy issues.
Michel Barnier, who represented the European Union innegotiations over the UK’s exit from that organisation,
counselled understanding rather than condemnation of thisphenomenon. “We have to be careful not to confuse
populism and popular feeling,” he said. “We have toaddress people’s fears with action.”

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Michael Hartnett, Chief Investment Strategist, BofA Global Research

Europe’s Path to Revival
The EU’s expansion to include Central and Eastern European
countries has increased economic frictions within the bloc,
fuelling populist sentiment, noted former Italian prime minister
Enrico Letta, who joined Barnier and Martin Schulz, former
president of the European Parliament, for a panel discussion on‘The Future of Europe.’ “Enlargement is an increasing
challenge for many reasons – political, economic,agricultural,” Letta observed.
These geopolitical currents are weighing not just on growth, butalso sentiment towards European markets. Investors, andEuropeans, are cautious about the direction of U.S. policies
towards Europe after the country’s presidential elections.
However, in a presentation on BofA’s Global Investment
Atlas, Michael Hartnett, chief investment strategist for BofA
Global Research, pointed out a resolution to some of thesecurity and political questions hanging over the continent“could unlock the upside as far as Europe is concerned.”

Bringing dynamism backThis sense of Europe’s untapped potential was shared by othersummit delegates. Schulz urged Europe to get better atunleashing the power of private capital. “We must create in
the euro zone instruments to mobilise private
investments,” he said, identifying public-private partnerships
as a key means of achieving this.
Emma Marcegaglia, chairman and CEO of Italian industrial
conglomerate Marcegaglia Holding, meanwhile, advised firms toinnovate, and harness new technologies. “AI is at the centreof the discussion – the risks and ethics, but also theopportunities,” she said.
Marcegaglia chaired a panel titled ‘Made in Italy’ with some of
the leading lights of Italian industry: Ermenegildo “Gildo” Zegna,chairman and CEO of the Ermenegildo Zegna Group; Andrea
Guerra, CEO of Prada; and Luca Garavoglia, the chairman ofDavide Campari-Milano, parent company of the Campari Group.
Together they shared their insights into some of Italy’s, and byextension Europe’s, still considerable competitive advantages.

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Europe’s most successful exports are defined by their ability tointegrate a storied heritage with a contemporary sensibility, thepanelists noted – a balance that could be considered thecontinent’s ‘secret sauce.’“European companies have to tackle the tradeoff between
heritage and modernity,” said Marcegaglia.
“We need brands that are credible because they haveheritage, but at the same time don’t get dusty” agreed
Garavoglia.
Perfecting this balance between the old and the new,craftsmanship and efficiency, has been key to the success ofEurope’s thriving luxury brands. This is in no small part due tothe premium attached to European names, and their distinctive
identities, which Guerra sees as mission-critical in the luxury
sector. “There are no shortcuts,” he stated. “The only thingthat counts is your brand, full stop.”

U.S. luxury spending relative to 2019 peakedin 1Q22 and has normalised since thenU.S. luxury spending relative to 2019 peaked in 1Q22 and has normalised

80%60%

Seven quarters ofacceleration

Six quarters ofnormaization
normalisation

40%

20%0%

3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23
QuaterQuarter

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Europe’s Path to Revival
Luxury leads the way
In recent years, Europe’s luxury brands have capitalised on theircraftsmanship and design aesthetic to go beyond the coreproducts for which they are known and chart a new future forretail. Leading names like Prada have taken extensive steps toincorporate rich experiences into their physical stores,
introducing amenities such as the Prada Caffè at Harrods inLondon. “Brand stores are improving day by day in termsof experience,” said Guerra. “Our stores are becoming
places you can spend your entire afternoon in.”
Many of Europe’s greatest companies are family businesses,
noted Marcegaglia, a model which unites heritage with theethos of each new generation. “Gildo” Zegna, whose
Ermenegildo Zegna Group encompasses brands such as ZEGNA
and TOM FORD FASHION, had some pertinent advice on how toensure family-run enterprises last the distance and avoid
internal disputes. “Think of your family as a house,” headvised. “Each generation has to build a solid floor.”
Ultimately, Europe’s greatest economic strengths may be its
diversity, and its soft power. This cultural allure inspires
consumers from across the globe to perceive its products as
uniquely sophisticated and desirable, and positions its
companies as proven and enduring institutions in a world wherevalue too often exists only for the short term.
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