Warning system could have discerned crisis

BRUSSELS – Economic crises like the ones that have struck Greece, Ireland and Spain since last year could have been predicted much earlier if a wider range of macroeconomic factors rather than just fiscal ones had been examined, one of Europe’s leading economists said yesterday as the financial services provider Allianz SE and the Brussels-based think tank the Lisbon Council presented a study that evaluates and ranks the economies of the 16 eurozone countries based on a range of indicators. «This type of mechanism might be an alert system to ensure balanced growth,» said Professor Michael Heise, chief economist of Allianz and the principal author of the study, which indicates that Greece was in worrying territory as early as 2006. The study, known as Euro Monitor, ranks the 16 eurozone members according to 15 quantitative indicators in four key categories: fiscal sustainability; competitiveness and domestic demand; jobs, productivity and resource efficiency; and private and foreign debt. Unsurprisingly, Greece ranks as the worst-performing economy, below Ireland. Germany and Austria are the eurozone’s best performers. «Ireland, alongside Greece, is one of the countries that today endangers the credibility of the euro area most,» says the report. Greece scores particularly badly on competitiveness and domestic demand as well as on debt. But Heise said it was encouraging that private debt in Greece was lower than in many other countries. «The debt situation in Greece is not as pronounced as it is in Ireland, Portugal or Spain, so there is a good chance Greece will get out of the current situation.» The Euro Monitor aims to show how an extensive early-warning system for the eurozone could work and how monitoring of those economies can be both thorough and focused on achieving balanced growth. «Since the introduction of the euro, large imbalances have developed in the Union that threaten the credibility of the euro if not addressed decisively,» said Heise. The study was made public ahead of a meeting of EU leaders in Brussels tomorrow and Friday when they are expected to approve a tightening of budget rules for member states and the introduction of sanctions for noncompliant countries. Allianz and the Lisbon Council back the tightening up of EU economic governance but suggest that macroeconomic balances, as identified in the Euro Monitor, should also be addressed. «The responsibility for solving the current crisis remains with national governments and the underlying imbalances will take resolute action, decisive leadership and common determination to resolve,» said Heise. «The Euro Monitor will help highlight the progress made in rebalancing growth down the line. «I would hope that some peer analysis like this would lead to some peer pressure on governments to reflect on the imbalances in their economies.»

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