European finance ministers: 2008 rankings

The Financial Times’ guide to Europe’s finance ministers offers an imperfect but insightful league table of economic and political skills. This year it has been expanded to cover non-eurozone countries, and designed to reflect the broad range of skills need at a time of exceptional financial and economic turmoil.

Now in its third year, the FT survey benchmarks performance, to reveal who is the best performing and most respected – as well as potential future stars. The challenges this year were greater than ever.

There was, however, one last man standing. Finland’s Jyrki Katainen has emerged as winner of this year’s competition. Although small, Finland is a rarity among European economies – stable financially and expected next year still to be running a healthy budget surplus.

The competition methodology, which falls into three parts, reflects the many tasks facing finance ministers.

The economic rankings:

• Test 1: Public sector balance as a percentage of gross domestic product, 2009 forecast, cyclically-adjusted. Ranked by size of surplus.
• Test 2: Percentage point change in public sector balance since 2004.
• Test 3: Overall tax burden as percentage of GDP, percentage point change 2002-2007
• Test 4: Change in ”tax wedge” or difference between labour costs to employer and net take home pay of employees, 2002-2007
• Test 5: Percentage point change in overall tax rate on dividend income, 2003-2008

Sources: Organisation for Economic Cooperation and Development, European Commission

The political tests, based on voting by an eight-strong panel of economists and commentators, rank the ministers according to the following attributes: lucidity. (swiftness in realising the extent of the global banking crisis), leadership skills (including role played at a European level) and élan (effectiveness domestically).

Political indicators based on voting by: Marco Annunziata chief economist, Unicredit; Jacques Delpla, Member of the Conseil d’Analyse Economique, Paris; Robert Bergqvist, chief economist, SEB, Stockholm; Daniel Gros, CEPS, Brussels; Gilles Moec, Bank of America; Erik Nielsen, Goldman Sachs; John Thornhill, Financial Times; Peter Vanden Houte, chief eurozone economist at ING

The stability test looks at how financial markets’ perceptions of countries have changed since the start of the financial market crisis, based on the cost of buying insurance against default on money borrowed by the government.

Source: Markit

The final ranking is a weighted average of the three sections, with economic tests account for half the weighting, and the political tests 30 per cent.