Yet more lagging from Italy and Greece
At this stage in the euro zone crisis, we probably don’t need to be reminded how uncompetitive the peripheral economies are. (Arguably, of course, they would not be economically peripheral if they were more competitive, but that is for tautologists to debate). The United Nations, in the form of UNCTAD, has just pinpointed another weakness, however — huge underperformance in foreign directed investing, or FDI.
The numbers it has just released only go as far as 2010, so the real crisis cauldron has yet to come. But they show that Greece and Italy have been punching way below their weight.
Greece has attracted a relatively small amount of foreign direct investment compared to other countries in the European Union (EU). In 2010, Greece’s share in the EU’s GDP was 1.9 per cent. In the same year, however, the inward FDI stock of Greece amounted to €26.2 billion ($35.0 billion), or less than 0.5 percent of the combined FDI stock of EU countries. Similarly, Greece’s share in the total outward FDI stock of EU countries was 0.4 per cent.
In other words, Greece neither attracts business investment or exports. While this may not be particularly surprising given Greece’s weak industrial base and chronic red tape, the picture for much bigger and G7 member Italy is just as bad.
Compared to most of the other major EU countries, Italy is underperforming in its FDI attraction related to the size of its economy: while Italy accounted for 13 per cent of the EU’s GDP in 2010, its outward stock was 5.3 per cent and its inward stock was 4.9 per cent of the EU’s totals.
The only other euro zone country included in UNCTAD’s latest batch of reports is France. Both inward and outward French FDI is in line with its economy.
So, more evidence — even if we might not need it — that the euro zone’s soft southern belly is just not pulling its weight.