The Euro Monitor 2010

The Euro Monitor 2010 concludes that the 16 countries of the eurozone need to do more to underpin the credibility and stability of their common currency over time. The study evaluates and ranks the 16 eurozone countries based on their contribution to balanced growth, that is growth devoid of macroeconomic imbalances, and thus to overall euro-area stability. It is the first publication of its kind – and the first one to be published after the European debt crisis earlier this year – which provides a comprehensive overview of the current state of all eurozone countries. It ranks them 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. The Euro Monitor is designed to serve as a macroeconomic surveillance and early-warning tool, flagging up existing and emerging imbalances.

Among the 2010 Euro Monitor’s key findings:

- Above all – and as a matter of top priority – the European Monetary Union (EMU) needs new sources of  sustainable growth if the euro is to remain a truly stable currency. In the medium term, the eurozone would need at least 2% real growth per annum to reduce debt and unemployment substantially. At present, we forecast growth in 2011 of 1.7%.

- Germany and Austria are the best performing economies in the eurozone, scoring Nos. 1 and 2 respectively, while Ireland and Greece bring up the rear.

- Primarily as a result of the economic downturn in 2008/2009, all eurozone countries – except Germany and Malta – have seen their overall measure of balanced growth decline since 2005. Today, none of the 16 countries of the eurozone can claim to be on a fully sustainable path for overall balanced growth. In fact, 13 of the 16 countries are in the mid-level rating group of the Euro Monitor, indicating that the overwhelming majority of eurozone countries is mired at more or less the same overall mediocre performance level. No country – not even Germany – can count itself a top performer in 2010. And Portugal and Spain are especially vulnerable; an economic slowdown could push either country rating down further.

- While most eurozone countries are in roughly the same medium-range position on measures of “fiscal sustainability” as well as “jobs, productivity and resource efficiency”, there remain deep and possibly dangerous divergences in the all-important categories of “competitiveness and domestic demand” and “private and foreign debt”. Cyprus, Malta and Greece do particularly badly on competitiveness and domestic demand, while Greece, Spain, Portugal and Ireland trail on private and foreign debt.

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