While Cyprus is a relatively small economy in the overall EU scheme, the announcement that EU regulators wanted to require banks there to seize 10% of Cypriots’ accounts (equal to 5.8 billion EURO) as part of a bail-out package is causing great concern and rattling investor confidence across the wider EU markets. Despite having somewhat addressed the Greek, Irish and Portuguese debt crises, many experts now believe that the large northern countries in the EU are apparently willing to against risk a meltdown in the Euro by demanding that the citizens of Cyprus (along with more than a few Russians who use the banking system there to “clean” deposits between Russia and Cyprus) directly pay for some portion of the bank bailout, rather than increasing taxes as was done for the others. Though the Cyprus government has turned the EU back on this demand for now, this latest EUR dust-up does have the potential to significantly hit investor confidence, and with it the capital available for companies to invest in new assets, including new technology solutions.
Prior to the big Euro crisis that first began heat up in 2010, we were seeing spending on E/CTRM technologies in Europe accelerating a greater pace than we were seeing in other geographies, including North America – increases driven by a maturing market for technology and the liberalization of the European energy markets. In 2008, the spend for new systems in North America accounted for about 55 – 60 percent of the total market, with Europe accounting for slightly more than 30% and the rest of the world, about 10%. The following year, Europe’s share was rising above 35%, with most of the gains coming out the North American share. Even with the emerging debt issues, many vendors were still viewing Europe as THE growth market in 2010. Unfortunately, as the year began to unfold, it became clear that the emerging issues were quickly becoming a continent-wide crisis, leading European companies to slash investments and investors to flee the EU zone, taking their money with them.
Overall, 2010 was a difficult year for many E/CTRM companies, with the European markets slowing down and the North American, Asia/Pacific and other global markets unable to pick up the slack. At the end of that year, we estimate that the North American share of the E/CTRM markets was back up around 60%, with Europe back down to slightly less than 30% and the rest of the world slightly above 10%, a geographic split that continued through 2011 and early 2012. As the Euro crisis began to stabilize and investors began to “bake-in” the remaining risks of a Euro meltdown, the technology markets there began to recover and demand did seemingly increase in the latter half of the year.
Optimism amongst the technology vendors servicing the European market was definitely looking up coming into 2013, with most feeling the worst of the debt crisis was well behind the market, and any remaining concerns were fully accounted for as companies began to seek new E/CTRM solutions. Unfortunately, with the EU now potentially setting a precedence with the Cyprus bailout plan, some investors in potentially exposed countries may not be willing to leave their capital in accounts that could eventually get a not insignificant hair-cut should the central authorities decide that confiscation will be a significant new funding source for future bailouts. Even as the final outcome of the Cyprus situation is unclear for now, the larger impacts for investment in Europe, and more specifically investments in technology may be equally unclear. Hopefully, as with the previous debt crises, emotions will cool, rifts will heal and businesses can continue to invest with some surety that that investment will provide a return.