Euro Plus Monitor 2013

The German bank, Berenberg Bank, and the Brussels "think-tank" The Lisbon Council have released the 2013 edition of their study on the global health and adjustment of economies of 17 countries in the euro zone, plus Sweden, Poland and UK. This study analyses and ranks the Member States of the euro zone on the basis of two main composite indices:

On the one hand, based on the current health of the Fundamental Health Indicator (FHI) economy - through indicators related to budgetary situation, foreign trade, unit labour costs and structural reforms; on the other hand, according to the capacity adjustment API (adjustment progress indicator - by monitoring indicators related to international trade, financial sustainability, competitiveness and structural reforms over a period of time.

The countries are then classified by sub-category and indicator on a scale of 0 (poor performance) to 10 (best performance).

Overall, according to the authors of the study, most countries with scores above average in regard to the composite index of global health FHI make fewer efforts to improve their situation and thus receive lower scores for API adjustment. However, the authors also state that a lower score for the adjustment indicator API may also simply mean that the country does not want to implement adjustments, or it is not necessary for the good health of its economy.

According to this 2013 study, Luxembourg is classified much better regarding the current health of the economy (score 7.0 / ranked 3rd) for his adjustment to cope with the crisis and challenges (score of 2.0 / 19th). Germany ranks second for FHI and 16th for API, Belgium is 10th/18th, France 16th/14th and The Netherlands 5th/13th.

As regards more specifically the overall health indicator FHI:

• for growth potential, Luxembourg is ranked third (score 6.8);
• in terms of competitiveness, Luxembourg ranks 7th (score 6.4);
• on sustainability of public finances, Luxembourg ranks first (score 9.3);
• for the faculty of recovery, Luxembourg ranks 10th (score 5.7).

The success of Luxembourg is particularly attributed to its strong outward (high proportion of exports) and its major financial centre, two factors that make the country afford a high level of regulation (including the labour market). The high proportion of exports, strong growth potential, healthy public balances, high household savings and a current account balance largely positive, are considered to constitute the strength of the country. The important market regulation (products, services and the labour market), the high level of private debt, the strong increase in nominal unit labour costs and the vulnerability to shocks in the financial sector, are considered to constitute the main weaknesses of the Luxembourg economy.

To read the full report, please click here.