How did mediterranean economies transit to export-led growth. an analysis of the determinants of international competitiveness

The 2008 financial turmoil and the subsequent economic recession prompted Mediterranean economies (Greece, Italy, Portugal and Spain) to shift from a debt-led to an export-led growth model. These countries implemented a set of reforms, primarily involving labour market flexibilization and fiscal austerity, aimed at enhancing international competitiveness and reducing the gap with Germany, the leading country in terms of export success and the benchmark for economic performance. In this chapter, we focus on the main determinants of export competitiveness in Mediterranean countries, specifically price and non-price competitiveness, and compare these economies with Germany. Methodologically, we employ three refinements: (i) we divide the analysis into three subperiods covering the timespan of 1995–2018 (pre-crisis, crisis and post-crisis periods); (ii) we examine the manufacturing sector by differentiating based on technological intensity; and (iii) we adopt a subsystem approach to input-output analysis. We find that, although the gap with Germany has narrowed, a significant differential in both price and non-price competitiveness persists, and it is not limited to high-tech sectors. Instead of further rounds of structural reforms, a sustainable growth path in Mediterranean countries requires balanced and coordinated macroeconomic policies.