Italy and Greece Have A Bad Transparency International Score On Corruption, Matched By Bad “Doing Business” Grades – Poor Public Finances Go Together With Bad Governance, Corruption And Weak Economies

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By Paolo von Schirach

December 6, 2011

WASHINGTON – Bloomberg recently reported that Italy and Greece have the lowest scores within the Eurozone in an international ranking on “corruption perception” compiled by Transparency International, the leading organization in this field . The story tells us that Italy is number 69 in the world and Greece is in the number 80 slot, out of 183 countries, in a ranking in which 183 is the worst score. If one considers that emerging and poor countries get the worst scores, because of inherently weak governance and high corruption levels, Italy and Greece now are sliding into the third world, at least on corruption levels. In fact, Italy is now at the same level of Ghana and worse than Saudi Arabia.

Corruption, bad governance, weak economy

By contrast, the countries with the least amount of corruption world wide are New Zealand, Denmark and Finland. It is no accident that the most honest countries also have efficient governments and relatively prosperous economies.

Is there a connection between large and inefficient public sectors, a weak private sector and corruption? Arguably yes. An efficient, performing private sector would not tolerate corruption. But a weak private sector would be searching for ways to cut corners and obtain special treatments. As I noted in a previous piece on Italy, it is no accident that the Monti Government, instead of focusing immediately on the urgent debt crisis, on day one had on its plate a major corruption scandal about political favors, kickbacks and awards of major public contracts. Finmeccanica, otherwise known as one the best Italian industrial conglomerates, is in the middle of all this.

Bad World Bank “Doing Business” Scores

If we combine the Transparency International scores with the World Bank “Doing Business” rankings, the picture gets even worse. Out of 183 countries, (in a scoring system where 1 is the best and 183 the bottom), Italy is down to 87 from 83 last year. Greece is steady at number 100. And what is worse, if we look at key areas within this ranking, we see that Italy ranks 134 in the “paying taxes” category, 158 in “enforcing contracts” and 109 in the more mundane but equally important category of “getting electricity”. Well, these are third world scores.

Monti Government should deal with governance, beyond the debt crisis

Which is to say that the Monti government would have to do a lot more than just raising taxes to fix Italy’s problems. The emergencies measures just passed may do for the short term. But Italy, just as Greece, would need a fundamental reform of the entire public sector and governance in order to inspire enterprise and investments. And this is what Italy ultimately needs: enterprise and investments to grow the economy. Otherwise, it will be more of the same.

Disaster will be avoided, but Italy will continue to be weak

Sure enough, through a combination of higher taxes, spending cuts and the inevitable helping hand from the European Central Bank that will have to intervene to support Italian bonds, it may be possible to avoid disaster in Italy. This is possible, and I assume that eventually the acute phase of this crisis will be over. But, as these data indicate, the problems are much deeper. No way that a country with third world corruption levels and with a judiciary essentially incapable to enforce contracts will have smooth economic development. There is just no way. And Mario Monti is just one man, a “technocrat” placed there as an emergency care taker, with no political following.


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