And the winner is… Greece

The countries on the right of the chart pushed through the deepest structural changes in the OECD bloc over a three year period.

Three quick observations:

1) Greece scores highest. It has been turning itself inside out, contrary to the impession that you might have been getting. (From a low base, of course, and too late to avoid a return to the drachma, but it will make the second drachma era more dynamic when it comes.) This entirely conforms with what I was told by those on the ground helping to carry out the reforms.

2) Spain is also going through a supply-side revolution, and Italy has not done so badly. Was it really necessary to topple the elected government of Silvio Berlusconi over his alleged lack of reforms?

3) Germany is coasting, lulled into a false sense of security by its very cheap borrowing costs and comfortable position at the other end of the economic cycle. The “barriers to entrepreneurship” remain high.

You could say that the chart points to self-correction within EMU. The south is getting its act together while Germany slips. The two halves will eventually come back into alignment.

However, it will be years before such reforms yield fruit. By then the politicial systems of southern Europe will have blown up unless there is some kind of reflationary strategy to offset debt deflation.

Nor do I think that Germany will let its guard down for long. Formidable nation.

The OECD summary on the purpose of the reforms said:

These include sheltering active labour market policies from budgetary cuts, easing regulatory barriers to firm entry in markets with strong, short-term job-creation potential like retail trade or professional services, and reforming tax systems in ways that are less harmful to employment and growth. Governments should eliminate tax expenditures that do not promote growth, and shift the tax burden towards consumption, immovable property and environmental taxes.