The covid-19 has accentuated the fragmentation of the European Union. In a moment of political fragility we have performed a resilience rating analysis of the union as a whole as well as of the individual countries and specific macro regions. The idea is to perform a preliminary and simple assessment of how each country could resist a potential, even partial breakdown of the union.
As is customary, we utilize the following parameters reported on a quarterly basis by EUROSTAT (updated on Q4 2019):
Resilience ranges from a minimum of 63.7% (Ireland) to a maximum of 83.1% (Italy). Average resilience is 75.8%.
The ranking is illustrated in the bar chart below.
Unlike the ratings provided by Credit Rating Agencies, the above ratings are not opinions or sensations, or result of interviews with experts. They do not take into account political aspects. Resilience ratings are objective. Science, not opinions.
NB. Resilience does not necessarily equate to performance. A resilient system is only better equipped to resist shocks and is more stable in the face of adversities. Italy is an egregious example.
As is customary, Credit Rating Agencies tend to punish Italy with rating downgrades, especially in the proximity of elections. In terms of resilience, however, Italy has enjoyed a high rating over the past years. Italy’s membership of the Euro has greatly enriched other nations, while impoverishing itself. And now, in the moment of need, the EU has abandoned Italy. This endangers the not only the Euro but the union itself.
In a recent article, it is stated that: ” Belgian economist Professor Paul De Grauwe said that if the European Union does not show solidarity with member-states like Italy that have been hit hardest by the coronavirus, “the whole European project will disappear.”
He went on to advocate for the creation of “coronabonds,” a financial tool previously known as eurobonds, to help share the economic risk to countries affected by the virus.
Coronabonds have been advocated by several countries, including Italy, as well as European Central Bank (ECB) president Christine Lagarde — but have been largely opposed by richer countries like Germany and the Netherlands.”
It is interesting to note how a systemic analysis of the union yields a well below-average resilience of 67%. The other macro regions, such as the V4 (Poland, Hungary, Czechia and Slovakia), the Austerity proponents (Germany, Austria, Netherlands and Denmark) or the Mediterranean group (Italy, France, Spain, Portugal and Greece) all have very similar resilience, close to 70%, only 3% above that of the system as a whole.
For illustrative purposes only, we show the Complexity Maps of Italy and Ireland. It is interesting to compare the respective hubs (the large boxes on the diagonal).
Without Italy, one of the founding members of the Europen Union, the Euro will not survive. However, without help from the EU, Italy will have to do it alone. Italy is a G7 country. It has the second largest manufacturing industry in Europe and the World’s third largest gold reserves (after the US and Germany). Moreover, it has one of the most resilient economies in Europe. Italy can do it alone.
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