The Helvetic Tiger

There’s a country in Europe with a large financial sector, big exposure to foreign trade, a floating exchange rate, and politics complicated by 4 communities within its governing structure.  But enough about the United Kingdom.  The latest statistical release from Eurostat covering GDP up to Q4 2008 is fascinating, not least because they also include the EFTA non-EU members, meaning Iceland, Switzerland, and Norway.  A few things stand out.

First, if you were looking for a country that should have been hammered by the financial crisis, it would be one fitting the profile of our opening sentence but with the additional disadvantages of being outside the EU umbrella and being the whipping boy for the G20 complaints about tax and regulatory havens.  Step forward Switzerland, which despite that baggage saw Q4 GDP just 0.3 percentage points down from Q3 or 0.1 percentage points down compared to Q4 2007.   Given how disastrous Q4 was on average, that would be a decent performance even before taking account of Switzerland’s high vulnerabilty due to the previously mentioned factors.

Second: anyone want to guess which country among the EU + EFTA collection (with seasonally adjusted data) was the worst performing in Q4 last year compared to Q3?  That would be Ireland.  Even on an annual basis, only a couple of the Baltics turn in a worse performance, and they didn’t begin from as seemingly secure position as Ireland did.  And the Irish crisis is at its core a fiscal crisis, which has still not been convincingly addressed.  Just as well those G20 enhancements to the IMF lending capacity could cover a rich European country with cap in hand.

Finally, one other country deserves mention for keeping the show on the road in the face of predictions of gloom: Greece.  Analysts look at the public debt numbers and think it can’t dodge a crisis.  But it did dodge a recession in 2008, despite political chaos.  Maybe there’s a Hellenic Tiger as well.

Message: politicians are in the business of pretending that the dire circumstances are due to events beyond their control.  But even in a global crisis, there is significant country variation in impact.  We need to spend more time looking at how an unlikely set of countries have coped relatively well.

5 thoughts on “The Helvetic Tiger

  1. If the financial sector in a country did not engage in “toxic” transactions, then the only effect that country would feel would be the indirect effect of a worsening global economy.
    After all no money has been lost out of the country, it’s just that it will be harder getting money in. How important that will be depends on how connected that country is to the world economy.
    So the effect of the global crisis definitely does
    not need to be the same for all countries.

  2. In other words, forget all metrics and standards of economy. Forget, the laws and the rules.

    Since the economy is not science I can understand that, however economy in not working in vacuum and it is occupied, busy and shepherded with charlatans with MBA “from the best school”.

    Rule of the game is corruption, and how well connected you are. Which in turn suggesting, if you are member of oligarchy strata, and you buddy is: Geithner, Ruben and banksters, you are OK. Or for that matter moron as Berlusconi, and new neo-naci European elite.

    Viva la, fractional banking system.

  3. …whipping boy for the G20 complaints about tax and regulatory havens.

    Being such a “haven” is a good thing. Cato had a nice talk on why tax havens are good fairly recently. A podcast is available.

    One thing that was pointed out was that tax havens provide protection for persons who live in regimes which are politically unstable or where kidnapping or other forms of private extortion are common.

  4. I look at these Europe differentials in terms of the impact a common monetary and exchange rate policy has on very different countries.

    Monetary policy was highly expansionary for Ireland and Spain–so these countries had a huge housing boom that they are devastated from. Right now, countries can’t depreciate their currencies, so Italy and Germany’s export hubs are suffering.

    Rather than reflecting regional differences in policy, it really shows how taking policy choices on currency away from governments over a very heterogeneous area can lead to perverse effects. Over time, as Europe gets as integrated as America, this should get better.

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