Eurozone strugglers lack innovative knack

To get an idea of the economic mountain euro zone strugglers Greece and Portugal have to climb, consider this: per million inhabitants, they each filed fewer than eight applications with the European Patent Office in 2010.

Germany, with the advantages of scale that go with a population eight times bigger, lodged 335 patent applications per million residents. But the Czech Republic, of a similar size to Greece and Portugal, managed 16. Much-smaller Ireland boasted 112, according to calculations based on data on the EPO website.

Figures on research and development are a little better.

Greece spends just 0.6 percent of GDP on R in the long run, we see reforms in education as perhaps having the largest payoff.”

Unlike Portugal, the environment for innovation in Greece has improved only slightly in recent years, Deutsche said. There are too few innovation and research projects worthy of being funded, and the education system is not imparting the right skills and qualifications.

“There is little potential to leverage the development of fast-growing industries with high productivity levels,» Stobbe and Pawlicki said.

What is to be done?

Waugh stressed the importance of a supportive business environment and said exposing companies to greater competition would spur them to innovate to stay in business.

His OECD colleague Wyckoff said Europe needed to attain scale by removing the barriers to cross-border collaboration in science and innovation.

Deutsche’s researchers highlighted the urgency for companies in traditional industries in Greece and Portugal such as tourism and textiles to embrace a culture of innovation.

In the short run, with the crisis countries desperate for growth, foreign direct investment could play a key role in helping both countries to attract modern technology and management methods.

“But to do so the underlying business conditions will have to be overhauled: a comprehensive economic strategy has to include a modernisation of the public sector and the implementation of structural reforms,» Stobbe and Pawlicki concluded.