Banks pulling Ireland down as global rivals forge ahead
Financials and government red-tape 'dragging down economy'
Published 10/09/2010 | 05:00
Ireland has slid four places in the global competitiveness rankings by the World Economic Forum (WEF).
A survey of 13,500 business leaders worldwide showed executives see Ireland's banking sector and government inefficiency as the two factors most damaging to the Irish economy.
Responses to the WEF's survey on doing business in Ireland showed one in four executives surveyed saw access to financing as the biggest obstacle to Ireland's competitiveness. Another 18.5pc cited inefficient government bureaucracy, making that the second biggest complaint.
Also on the slide is the US, which slipped two places to fourth in this year's rankings.
On the whole, smaller and more affluent economies dominate the top 10 rankings. Switzerland tops the list -- which is based on a mixture of statistical and perception studies -- and the Nordic trio of Sweden, Finland and Denmark are all represented in the top 10. Germany, the US and Canada all ranked highly and Japan is the only Asian economy among the top 10, despite the rise of China and India as global players.
The WEF is a non-governmental organisation best known for its annual get-together of bigwigs from business, finance and politics at Davos in Switzerland. Its annual competitiveness report is researched and published by a panel of academics headed by US-based Xavier Sala-i-Martin, a professor at Columbia University.
Meanwhile, banks and the governments were also in focus as ratings agency Fitch warned that eurozone banks and governments would end up competing for liquidity in the money markets over the next two years.
More financing concerns for Irish banks suggest there is no respite in sight for corporate borrowers, and the drag on Ireland's competitiveness is likely to persist.
The warning on bank financing came as Fitch published a special eurozone sovereign review yesterday, with the report coming in a week when the cost of Irish government debt spiked compared with Germany and other well-regarded economies.
Despite the generally dour tone the review does cite some positives for Ireland. While Fitch showed Ireland has the worst deficit of any eurozone economy the actual level of indebtedness is relatively low relative to GDP and Ireland does not face the same demographic risks as other euro economies.
Fitch reckons that ageing populations in Greece and core euro economies France and Germany will limit their ability to cut government debt even when the current crisis is over. Ireland, in contrast, has a markedly younger population than most of the eurozone with the lowest pension spending of any country and only accession states Cyprus and Slovakia spend less overall on "age-related spending" -- a mix of pensions, healthcare cost, long-term care, unemployment benefit and education spending.