These Eurozone Countries Have Been Adapted Best To The Crisis

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The Lisbon Council Think Tank released a study today documenting how eurozone countries have adjusted to increasing financial turmoil on the continent.In order to see which countries are making the best “adjustment progress” the study (which can be read in full here) looks at three main factors in each of the 17 eurozone countries.

Firstly, each country’s external adjustment is looked at. Secondly fiscal adjustment is taken into account and lastly the change in real unit labour costs is assessed. Each country has been given a score and a rank based on the result of this investigation. After these factors are assessed each country is given a score out of 10 as to how well it has adjusted.

Working with the Berenberg Bank, the think tank has also ranked the overall fiscal health of each of the countries.

As you’ll see by looking at the ranks side by side, in most cases the countries that have adjusted the most to fiscal turmoil are those in the most economic trouble.

In other words, those that need to adjust the most are doing so, but it still may not be enough to divert disaster.

#10 Finland

Score: 3.8

Rank for overall fiscal health: 3

Strengths: Excellent scores for human resources, with the best PISA result and a strong ability to integrate immigrants; No structural fiscal deficit; no fiscal sustainability gap; Very low ratio of household debt to GDP; Liberal regime for market regulation.

Weaknesses: Significant drop in net exports after 2008; High share of government expenditure in GDP; Insufficient export orientation for a small economy.

SOURCE: Lisbon Council Think Tank

#9 Luxembourg

Score: 4.0

Rank for overall fiscal health: 2

Strengths: Excellent fiscal position; Strongest trend growth among the mature eurozone members; huge current account surplus; low rate of public and private consumption.

Weaknesses: Heavily regulated service markets; unusual dependence on financial industry; high degree of market regulation; high degree of employment protection.

SOURCE: Lisbon Council Think Tank

#8 Netherlands

Score: 4.0

Rank for overall fiscal health: 4

Strengths: Excellent use of labour resources, with a very high employment rate and very low rates of youth and long-term unemployment; very liberal regulatory regime; strong export performance; major current account surplus.

Weaknesses: High share of government expenditure in GDP; oversized financial industry; underling primary fiscal deficit above average.

SOURCE: Lisbon Council Think Tank

#7 Portugal

Score: 4.9

Rank for overall fiscal health: 15

Strengths: Major fiscal adjustment has started; excellent score for integrating immigrants.

Weaknesses: Very subdued trend growth; insufficient export orientation; wide current account deficit; huge underlying fiscal deficit in 2010; unsustainable fiscal position.

SOURCE: Lisbon Council Think Tank

#6 Slovakia

Score: 5.0

Rank for overall fiscal health: 6

Strengths: Best score for recent trend growth in the eurozone; strong export orientation; very low share of government expenditure in GDP; subdued propensity to consume; low ratio of public debt to GDP.

Weaknesses: Very high rates of youth and long-term unemployment; very low scores for human resources; excessive underlying fiscal deficit 2010.

SOURCE: Lisbon Council Think Tank

#5 Spain

Score: 5.7

Rank for overall fiscal health: 12

Strengths: Comparatively low ratio of public debt to GDP; below-average share of government expenditure in GDP; serious turnaround in net exports and the underlying fiscal position; modest degree of regulation for product and services markets.

Weaknesses: Low rate of trend growth outside construction; very bad employment scores, with worst youth unemployment within the eurozone; high structural fiscal deficit in 2010; serious sustainability gap; low fertility rate, low PISA scores.

SOURCE: Lisbon Council Think Tank

#4 Malta

Score: 6.4

Rank for overall fiscal health: 11

Strengths: Strong rise in net exports since late 2007; low share of government expenditure in GDP; subdued unit labour costs.

Weaknesses: Very low employment rate; unsustainable fiscal position; major current account deficit.

SOURCE: Lisbon Council Think Tank

#3 Ireland

Score: 6.5

Rank for overall fiscal health: 10

Strengths: Strong adjustment effort with a major rise in exports and a significant fall in unit labour costs; best fertility rate in the eurozone; major increase in the household savings rate; the least regulated markets for goods and services in the eurozone; high household savings rate.

Weaknesses: The worst structural fiscal deficit in the eurozone; highest ratio of bank assets to GDP; excessive rise in unit labour costs 2002-2010; pronounced fall in employment.

SOURCE: Lisbon Council Think Tank

#2 Greece

Score: 6.6

Rank for overall fiscal health: 17

Strengths: Major turnaround in the cyclically adjusted fiscal deficit; major improvement in net exports through slump in imports; low ratio of household debt to GDP, BUT few major strengths.

Weaknesses: Worst ratio of public debt to GDP; very low PISA scores; high propensity to consume; huge current account deficit; very low household savings rate; most regulated markets in the eurozone.

SOURCE: Lisbon Council Think Tank

#1 Estonia

Score: 8.4

Rank for overall fiscal health: 1

Strengths: Top ranking for fiscal sustainability; strong export orientation; good PISA scores; rapidly adjusting labour market; very liberal regulatory regime.

Weaknesses: Excessive rise in labour costs during the boom years until 2008; low household savings rate; still reeling under the sharp post-bubble drop in employment; below average capacity to integrate immigrants.

SOURCE: Lisbon Council Think Tank

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