Switzerland first, Greece 96th. Those are the starkly troubling rankings on the World Economic Forum’s 2012-13 competitiveness league table. Northern European economies do well, the euro zone periphery doesn’t. It might suggest the combination of Germany and Greece in the same currency is like putting Chelsea and Hereford United in the same soccer league. The result is years of slaughter.
In the Alpine heights, the vertiginous franc – 25 per cent higher against the euro than four years ago – seems not to have dented Swiss bliss. Swiss innovation, technological readiness and labour market efficiency fly high in WEF indexes. And the country’s public institutions are “among the most effective and transparent in the world.” High-tech innovation and good government: It’s the economic equivalent of a dream team, strong enough to triumph even with a man down, or a super-strong currency.
The euro, too, is a strong currency and some of its members can compete in the top league. Germany, the Netherlands and Finland are in the WEF’s top 10 while Belgium, France, Austria and Luxembourg make the top 22. But some euro zone countries have neither technological sophistication nor good governance. Spain lags well behind in 36th, Italy is at 42nd, and Portugal 49th, and Greece is egregiously bad.
The big Italian economy, the zone’s third-largest and too big to bail, might be considered the worst worry. Italy in fact scores highly for productive sophistication. It can come up with the goods. But it scores badly in institutional governance. Its problems are an extremely rigid labour market and high levels of corruption and organized crime.
The question is whether Italy and other euro periphery economies can improve enough to be able to grow while saddled with the currency of Germany. Or whether it would be better to split the euro, reflecting Europe’s current gulf.
There is some encouragement in the WEF numbers. Italy’s ranking has improved in recent years. Many Italians would welcome the improved governance that would propel it higher. But to get there they will have to take with them the millions who wouldn’t.