Parts of Europe Have Quietly Become Competitive

During the Olympics, the ad ran constantly: A red Cadillac ATS speeds through hairpin turns in Morocco’s Atlas Mountains as a wide-eyed wingman yells, “We’ve been going as fast as you possibly can without taking this thing off the side of a cliff!” The disc brakes that make this stunt possible are from Brembo, a company in the Lombardy region of northern Italy. Brembo is not what you picture when you hear people tossing around phrases about Italy like “profligate” and “basket case.” It’s an elite export powerhouse, with €703 million ($871 million) in revenue in the first six months of 2012, up 11 percent from a year earlier. In Germany, its biggest market, Daimler gave it a supplier of the year award in 2011. “The performance of our order backlog allows us to look toward the coming months with confidence,” Chairman Alberto Bombassei said on July 31, when he announced rising first-half revenue and profit.

Overlooked in Europe’s financial crisis is that some of the countries in the biggest trouble have quietly improved their international competitiveness since the crisis began in 2008. They’ve cut back on imports and increased exports. Spain’s trade deficit is a quarter what it was before the crisis. Italy ran a €1 billion trade surplus in May, the last month available. Ireland has lowered its labor costs dramatically. Even Portugal has become less dependent on foreign capital, the International Monetary Fund noted last month.