Europe Hampered by Corruption


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Georgianna Vaughn of Global Risk Insights highlights the problem of corruption in the Eurozone.  The Eurozone is comprised of 18 member states:  Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia, and Spain.  Specifically, a new study from the European Commission (EC) shed a new light to unethical behavior that has been estimated to 120 billion in lost tax revenue.

This highlights the importance of establishing effective institutions that promote the rule of law and protect private property rights.  When global investors are compelled to bribe government officials to win development contracts, they are less likely to invest because they are unsure of the ground rules.  Therefore, developing countries are the beneficiaries as global investors take their funds away from Europe and pour them into Asia, Africa, and South America.

Vaughn also pointed out varying levels of adherence to anti-corruption laws.  With countries such as Croatia and Latvia taking on new action to minimize corruption, there are other countries, such as Sweden, Finland, Denmark, and Luxembourg, who consistently score high in low incidents of corruption.  On the other hand, there is rising concern that Germany, Estonia, the Netherlands, Belgium, and France are not doing enough to curb this damaging behavior.

In summary, all of Europe must act to prevent corruption or else as quoted by Georgianna Vaughn, they’ll be asking this question, “Why make a risky investment in Europe, when you can take a similar risk with the prospect of higher returns in the developing world?”

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