It is becoming increasingly evident that there is a contradiction between modern management theory and human resource practice.

Management theory encourages employees to become more entrepreneurial, to break away from conventional thinking, to make heroic efforts to respond to customers needs and to re-invent processes to provide products and services that are better, quicker and cheaper. These challenged and empowered workers too often collide against a human resource wall, running into a system that remains fixed on rules and procedures. With absolute authority and excruciating detail, rules govern every significant aspect of employees’ organisational lives – working hours, leave, duties, pay increases and performance measurement to name but a few. There are even rules which dictate how employees complain about the rules! I therefore say to my employer and business colleagues that labour market flexibility is a double-edged sword. To maximise the benefits it requires total employer flexibility. Flexibility in hours, pay terms, profit-sharing and conditions. If employers, employees and their unions understand this issue they will understand one of the most important human resource implications of the Europe-wide move to a single currency.

In summary, my advice to business is as follows:

1.Carry out a fundamental competitiveness and efficiency audit of your business.
2.Assess the impact, positive and negative, of adoption of the euro across each of your specific business units.
3.Be prepared. Put in place a comprehensive plan that deals with the negatives and seeks competitive advantage from the positives.
4.Understand and be aware of the overall logic behind the need for a central currency and that is to improve European business competitiveness.
5.Employees and Unions: support and take advantage of the creation of flexible labour markets.
6.Employers and representatives: adopt human resource practices that will support an entrepreneurial approach and will provide an environment to optimise the benefits of labour market flexibility.

It sometimes it pays to believe the obvious. Looking at current ten-year bond spreads, it is clear that the financial markets expect European Monetary Union to go ahead, with the UK and Sweden to join not long after 1999. The decision to fix the exchange rates of first wave participants from this May, and the likelihood that the grid will be frozen at or around current central rates, means that for many currencies, the game is over. Almost without noticing it, we have moved to a quasi fixed-rate regime for much of the European heartland.

The title of my paper is "The Challenge for Business" and there is no doubt that EMU and all that it represents is a challenge. But I hope that most companies pursue the challenge in search of opportunity rather than become disheartened in the same way as did Alex Douglas-Home, a past Tory Prime Minister of Britain, when he was quoted in 1964 as saying:

"There are two problems in my life. The political ones are insoluble and the economic ones are incomprehensible."

I suggest we go out and take advantage of this unfolding opportunity. For the winners, the prize will be a market strikingly similar to that of the US – but with 120 million more potential consumers.