New benchmark: The European economic sustainability index. Luxembourg ranks 6th!

The think tank European Policy Centre (EPC) has published a new composite index called European economic sustainability index whose object is to measure the sustainability of the European economies, both in the short, medium and long term.

According to the EPC, the markets, the press and politicians seem currently to to focus too much on the short term, i.e. deficits, the economic slowdown and debt, while the medium and long term challenges behind the debt have receive relatively little attention. However the ability of European countries to manage challenges ahead, such as national competitiveness, will determine in fine which economies will be sustainable. The main objective of this composite indicator is therefore to show in what areas the economic sustainability of European countries could be put at stake.

The composite index is built on six categories of indicators which are equi-weighted: public deficits, debt, economic growth, competitiveness, governance and corruption, and eventually the cost of the ageing of the population. These categories of indicators were selected to reflect a balance between short, medium and long term sustainability.

The 2010 classification is led by Sweden, followed by Denmark and Estonia. Luxembourg occupies the 6 th position together with Germany, and is part of the highly sustainable categorized countries. Belgium occupies the 13 th rank and France 15 th rank. The classification has also been recalculated for 2007 in which Luxembourg was still the 7 th position.

A more refined analysis of the results shows that the positions of different countries vary in the six categories. Luxembourg ranks well in five categories. However, in the cost related to the ageing population, Luxembourg is assigned the lowest score in the whole ranking.

The report delivers also an analysis based on a change of weight of each category. By providing long-term 'competitiveness/corruption' more weight (and assigning therefore less weight in the short term "growth/deficit"), Luxembourg ranks 7 th and therefore loses 1 rank compared to the equi-weighted ranking. However, putting more weight on the short-term "growth/deficit", Luxembourg gains two positions. Finally, by removing all long-term categories, Luxembourg is ranked 2 nd behind Estonia, and in front of Bulgaria.

Very useful information for us new EU countries (Slovakia) but too general. Question: We invest the EU structural funds. They should be used exclusively for starting sustainable structural qualitative changes towards sustainable better life and competitiveness. But often the funds are used in non-sustainable way, without any sustainable changes towards better life, competitiveness, etc.. There is a need to measure economic sustainability of each particular project in all stages of preparation to evaluation. What economic sustainability index / measuring tools can be used for evaluation of particular project/ investment/ institution?

The international benchmarks, like the “European economic sustainability index” from the European Policy Centre you are referring to, are constructed to give a global overview of countries/regions/cities performances regarding certain areas, like competitiveness, innovation, quality of life etc. They describe the global framework conditions within a country (like taxes, availability of human resources etc.) that impact the evaluation methods applied to each individiual project - financial (like the Net present value, Payback period, etc) or non financial (like creation of jobs, etc). The Luxembourg competitiveness observatory has made a list of a large number of those “framework” benchmarks that are published by international organizations (in French), with a link to the original sources (often in English). We would therefore recommend you to take a look at the following page: http://www.odc.public.lu/indicateurs/benchmarks_internationaux/index.html . This list could give you some ideas on what data to collect and benchmarks to use regarding your particular projects.

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2 Comments

09 December, 2010 by Anonymous
Very useful information for us new EU countries (Slovakia) but too general. Question: We invest the EU structural funds. They should be used exclusively for starting sustainable structural qualitative changes towards sustainable better life and competitiveness. But often the funds are used in non-sustainable way, without any sustainable changes towards better life, competitiveness, etc.. There is a need to measure economic sustainability of each particular project in all stages of preparation to evaluation. What economic sustainability index / measuring tools can be used for evaluation of particular project/ investment/ institution?
10 December, 2010 by Mr Pierre Thielen
The international benchmarks, like the “European economic sustainability index” from the European Policy Centre you are referring to, are constructed to give a global overview of countries/regions/cities performances regarding certain areas, like competitiveness, innovation, quality of life etc. They describe the global framework conditions within a country (like taxes, availability of human resources etc.) that impact the evaluation methods applied to each individiual project - financial (like the Net present value, Payback period, etc) or non financial (like creation of jobs, etc). The Luxembourg competitiveness observatory has made a list of a large number of those “framework” benchmarks that are published by international organizations (in French), with a link to the original sources (often in English). We would therefore recommend you to take a look at the following page: http://www.odc.public.lu/indicateurs/benchmarks_internationaux/index.html . This list could give you some ideas on what data to collect and benchmarks to use regarding your particular projects.

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