Returns in Europe have lagged this year, in part a reflection of the economic exposure the region has to Russia and Ukraine. Much of Europe remains mired in the economic muck. Broadly, economic growth in the region is less than 1%, sovereign debt-to-GDP levels continue to expand despite record low interest rates, and there is real disagreement among politicians with regard to the direction of economic policy within the euro zone, as evidenced by French President Hollande's firing of Economy Minister Arnaud Montebourg late in the month, who favored more stimulus rather than greater austerity in government spending. Not coincidentally, the US dollar index began to strengthen in early May and has since risen about 5%. We think that there is more going on here than simply a reaction to the rumblings in Ukraine. The US Federal Reserve's plan to conclude Quantitative Easing this fall, stronger economic growth in the US, and additional easing by the European Central Bank to try to stem deflation in Europe have all contributed to the dollar's upward move. European and Japanese multinational companies should benefit at the expense of their US counterparts should this trend persist—and we think it may.
We continue to favor companies that invest in their future growth, such as the Dutch global engineering and consultancy firm Arcadis. The company provides design and consultancy services for infrastructure and environmental projects. In this industry, reputation and experience are vital for generating business, which creates a barrier to entry for new firms, but also makes it difficult for existing firms to compete for projects that are outside of their immediate expertise. To overcome this, industry participants commonly enhance their service offerings by acquiring other firms. Arcadis has a long history of successfully acquiring synergetic businesses to grow its service capabilities and geographic footprint. In August, the company finalized an acquisition offer for Hyder, a UK-based peer, for £296 million, which was unanimously accepted by Hyder's board. We believe this large acquisition has the potential to enhance Arcadis's design and engineering services across all of its business lines. In addition, the deal enhances the company's offerings in the Middle East, as well as in Germany and the UK.
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