The Economist - 19_25 April 2014

The Economist April 19th 2014 Finance and economics 612 debt burdens. Four years after the euro crisisbegan with the first Greek bail-out,what has been achieved?Assessing the scale and effectiveness ofreforms is hard, not least since they tackle amultitude ofsins. There are three main categories:enhancingcompetition, especiallyin services; promoting business activityrather than stifling it; and overhauling labourmarkets. In practice a determined effortto improve performance involves reformsacross government. In Portugal, forexample, 400 measures have been introducedin the past three years.One gauge of progress in southern Europeis the World Bank’s “Doing Business”survey. This annual study, covering over180 economies, monitors regulation fromthe perspective of small and mediumsizedcompanies. Its overall index has tencomponents, ranging from the ease offounding a company to how readily contractscan be enforced. Countries areranked according to how light the burdenof regulation is, as measured by the numberof procedures involved and their cost.Other factors include how easily firms canaccess credit and how well they protectoutside investors. A lack of regulation isnot deemed a strength; rather the focus ison efficient regulation.The findings suggest that progress hasbeen made in southern Europe but that ithas been patchy both between differentcountries and within them. Betweenmid-2009, before the euro crisis took hold,and mid-2013 Greece’s rankimproved from109 to 72 (see table). Portugal has alsogained ground, from 48 to 31. Advances byItaly and Spain have been less marked, andFrance has actually slipped down the rankings,from 31to 38.Even where progress has been madethere is cause for concern. Greece mayhave improved its ranking the most, butthat was from a desperately poor startingpoint.Its current performance remains extremelydisappointing within some crucialcategories. It ranked 161st in the worldas a place to register property easily, ahandicap for a country urgently needing toencourage inward investment. Anotherconcern is its 98th-place finish for the easeof enforcing contracts, a crucial conditionfor firms to flourish.A long climbEase of doing business, rank2013 (2009)1 (1) Singapore4 (4) United States10 (5) Britain15 (7) Ireland21 (25) Germany31 (48) PortugalSource: World Bank2013 (2009)33 (53) Slovenia38 (31) France39 (40) Cyprus52 (62) Spain65 (78) Italy72 (109) GreeceWITH a workforce ofjust over 491,000in 2013, the United States Postal Service(USPS) is second only to Walmartamong civilian employers in America. Butit still employed more than 200,000 fewerpeople last year than it did just nine yearsearlier—when it handled nearly 500mmore pieces of mail and had almost 2,000more retail offices. The rise of e-mail hasleft America’s massive postal service withfar less to do, and it has been scrambling tofind ways to raise revenue.Earlier this year its inspector-general releaseda white paper suggesting that postoffices should begin offering financial services,such as cheque-cashing, small loans,bill payments, international money transfersand prepaid cards to which salaries orbenefits could be transferred. The reasoningis simple: a lot ofAmericans have scantaccess to banks and a lot of post officesSuch patchiness is widespread. Themountain that Matteo Renzi, Italy’s newprime minister, must climb is clearfrom hiscountry’s performance. Its overall rank isdismal enough, at 65. But Italy is even fartherdown the league table for the tax burdenon businesses (138); ease ofgettingconstructionpermits (112); credit access (109);and enforcing contracts (103). Spain ranksparticularly poorly as a place to start a business,at 142. That is a worry because researchhas established a strong link, unsurprisingly,between the regulatory ease ofstartinga businessand howmanyare actuallyset up.The World Bank’s index does not includethe impact on firms of employmentregulations. But other evidence suggestssimilarly patchy progress on labour-marketreforms in southern Europe. Despiteoverhauls in Portugal and Spain, southernEurope still suffers from bifurcated markets,in which the gap between “insiders”on cosy, permanent contracts and “outsiders”employed on a temporary basis is particularlypronounced. With so much yet tobe done it is worrying that the pace of reformalready seems to be slackening. 7Post-office bankingPut your money where your mail isATLANTAAmerica’s postal service ponders a foray into financial serviceshave too little to do.More than one-quarter of Americanhouseholds are unbanked or underbanked,meaning they either lack a currentor savings account, or they have one butstill use alternatives to banks such ascheque-cashers and payday lenders. Thatis an expensive habit: the average underbankedhousehold has an annual incomeof only $25,500 or so, yet spends around9.5% of that on fees and interest charged bythese banking substitutes.High-street banks find it hard to makemoney serving poor customers, since theytend to have little money on deposit thatthe banks can lend out. Penalties such asoverdraft fees are not always enough tocompensate. Since 2008, 93% of bankbranchclosings have come in areas wheremedian household income is below thenational average.1