Euro offers silver lining as competitiveness dives
The World Competitiveness Yearbook 2010, published by Swiss business school Institute for Management Development, ranks Ireland at 21 — down from last year’s placing of 19.
The list delivered a blow to US pride, with America for the first time toppled from the top slot by two Asian countries, Singapore and Hong Kong.
This change tends to underpin the claim by John Rogers of the Quantum Fund that Asian counties such as Singapore are destined to become the new hub for international trade and finance.
Where the Irish economy fits into this is hard to see at present.
Further analysis offered by IMD economists gave us little to cheer about, when it concluded it could take 10 years for Ireland’s public debt to be brought back under control.
Perhaps more noteworthy is their observation that this economy has already put a recovery programme in place, while adding that as an island economy our export-led focus will help support our future economic recovery.
Having offered those words of comfort, the report suggests our national debt is under pressure and the level of 64% cannot be sustained in the short term, with the budget deficit hovering at over 14% of GDP.
It’s tempting to fuel the gloom further by suggesting the euro crisis will add to our woes but it could in fact be the silver lining.
For years it has been the case that a strong euro was crippling out best efforts to grow our export base.
For an economy more reliant on the US and Britain for its overseas trade than the rest of our eurozone counterparts, the crisis could offer development opportunities to our food sector.
Some economists offer the view the euro has been overvalued — some would even say from its inception.
Certainly the very unnerving situation relating to Greece and the fear of a debt default has cast the euro project into a new orb.
The huge fear going forward is that the stringent constraints and spending cuts Greece and others will be obliged to engage in could set European growth back indefinitely.
The movement in US stock markets has started to reflect that concern and, even with the €750 billion financial ring-fencing of the euro region, the real danger is that this vast sum will not be sufficient to dig us out of the dilemma.
That debate will run and run and if the currency is to be defended, it means that by a process of stealth we are probably witnessing the closer integration of member states despite our best efforts to avoid such an outcome with the guarantees given on the Lisbon Treaty.
It could well get to the point for some countries where they will have to decide whether they are prepared to agree to a more federal type Europe.
That may be the only way to protect economic prosperity in the long term.
The alternative may be to prioritise national sovereignty resulting in a much less secure future outside the eurozone.
It may be a case of Brussels fiddling while the euro collapses if the strain becomes too great on the currency and the Germans decide they have had enough, but we are in unchartered territory for sure.
Allowing for that backdrop the euro weakness has done us a favour and offers the food sector, and indeed our broader indigenous manufacturing companies, a competitive edge when selling to the US and Britain.
It may turn out to be a short-lived advantage but we have to make the most of it.
