8/7/2013: The More Things Change... in Greece

So Greece - off-the-charts in terms of not meeting its 'Programme' requirements has been fudged:

Now, recall:

• Privatizations penned in for 2012-2013 are not happening - at all,
• IMF requirement for at least full year funding held in reserves - not fulfilled at all,
• 12,500 public sector workers that were to be put into 're-allocation or redundancy' pool are not there,
• There is a massive overspend in a number of areas, including health, with a shortfall of EUR1bn at the state-owned EOPYY health insurer,
• Income tax, property tax and corporate tax are not being enforced in full, despite numerous promises...

Earlier this am I predicted that:

And per IMF release above, this is exactly what has happened - fudging complete... And what fudging!

While Troika says that outlook for the country remain uncertain, there has been a staff-level (technocrats) agreement on new 'reforms' on top of the old one on which Greece failed to deliver. And these new reforms - hold your breath - are more cuts in health spending, repeated promises to cut 12,500 public employees, and more tax reforms... The more things change...

"The More Things Change the more the stay the same

The more things change the more the stay the same

Ah, is it just me or does anybody see

The new improved tomorrow isn't what it used to be

Yesterday keeps comin' 'round, it's just reality

It's the same damn song with a different melody

The market keeps on crashin' "...

Well, at least markets are not yet crashin' cause 'Greece really doesn't matter anymore' theory, right?..


Updated: 

The Eurogroup continued the endless parade of statements, comments and instructions today with this: http://www.eurozone.europa.eu/newsroom/news/2013/07/eurogroup-statement-on-greece/ which is largely the same drivel as already released by the Troika.

Some exceptions:

The Eurogroup also takes note that the economic outlook is largely unchanged from the previous review and is encouraged by the early signals pointing to a gradual return to growth in 2014.

I mean, ok, the logic is iron-clad: for months we've noticed that things are largely unchanged, but we've had rounds and rounds of changes made to T&Cs of the 'bailout' because things are largely unchanged. Still, our expectations never stopped changing... the recovery previously penciled in for 2012 has been moved to H2 2012, then H1 2013, then H2 2013 and now to H1 2014 or maybe H2 2014...

and more:

The Eurogroup commends the authorities for their continued commitment to implement the required reforms

But obviously, these are not enough and are not being implemented, so the commendations are for what?.. Alternatively - they are enough and are bing implemented, in which case why is Eurogroup issuing any statements on Greece?

At the same time, significant further work is needed over the next weeks to fully implement all prior actions required for the next disbursement

Aha, now I understand - 'further work' is needed... except, wait a second, the 'further work' is the 'prior-agreed work' that... per above statement is a part of 'commitment to implement'... which Greece either has delivered (per commendation) or failed to deliver (per rather urgent 'need for further work')... so which one?..

Much of the rest in the statement is rather specific and make sone wonder - if Greece is being asked to do in the next two weeks what it has failed to do in last 12 months, why on earth is Greece deserving and commendations or, alternatively, how on earth can it be expected to deliver that?!

Never mind, all of it is pure fudge - Greece will not deliver 12,500 souls to the Purgatorio and it will not be able to tighten tax collection (something it failed to do over close to 50 years) in time for October 2104. And the Eurogroup is not expecting it to. Instead, there will be noise of compliance, sound of cash register emptying, followed by 3 months of calm and German elections.

To quote another musician:

So long, Marianne, it's time that we beganTo laugh and cry and cryAnd laugh about it all again
Laugh about it, folks... for following the Eurogroup statement, the IMF Chief, Christine Lagarde went out to face the public with a claim that, hold your breath, Euro area needs growth and ... deep gulp of air, please... jobs.

So long, Marianne, it's time that we began...

7/72013: Irish Manufacturing & Services PMI: June 2013

In the previous post I covered in detail the dynamics of the Services PMI (here) and few posts back, I covered Manufacturing PMIs (here). Now, lets take a look at both together.

Chart above shows the deviations of both PMIs from 50.0, with pre-crisis and post-crisis averages.
The relative weakness in Manufacturing performance, from the end of Q2 2011 through current is pretty much apparent. Both, manufacturing and services PMIs signaled much stronger growth conditions prior to the crisis, than since the beginning of 2010.

The most significant decline took place in Services, with the pre-crisis average deviation from 50.0 at 7.6 falling to 1.9 average deviation in post-January 2010 period. With STDEV at 6.5 since 2008 (7.4 prior historical), and with skew at -0.7 and kurtosis at 0.73, we are nowhere near average deviation being statistically significantly different from zero since the onset of 'recovery'.

Manufacturing decline has been more modest, given weak rates of growth in pre-crisis period. The average rate of pre-crisis deviation from 50 was 2.6 and that well to 1.1. With historical STDEV of 4.2 and STDEV since 2008 at 5.2, skew at -1.6 and kurtosis of 3.24, this is again indistinguishable from zero growth conditions.

On slightly better side of things and along shorter-run dimension, 3mo MAs are both above zero, but, once again, none are statistically significantly different from zero.

There is a strong, but non-linear relationship between Manufacturing and Services PMIs at levels, and it shows that year on year, relative gains in Manufacturing over 2011-2012 got erased over 2012-2013 and were replaced by relative gains in Services.

Irish PMIs have, however, very tenuous link to actual economic growth. Here are two charts showing this week relationship for log-log growth terms, but exactly the same picture is confirmed by taking simple level deviations in PMIs from 50, as well as for linear and cubic relationships (for robustness):

It is quite telling that Services PMIs have much weaker explanatory power for GDP and GNP growth than Manufacturing PMIs, confirming that Irish services, dominated by ICT and IFSC tax-optimising MNCs are not as relevant to Irish economy as manufacturing sectors.

Another telling thing is that both for Services and Manufacturing, the sectors activity as measured by PMIs has stronger relationship with GDP than GNP - which is also predictable, once you consider the PMIs heavy slant toward MNCs.


Note: raw data on PMIs levels is taken from Markit-Investec releases, with all analysis above, as well as deviations from 50 and all other transformations, including quarterly data computations, undertaken by myself. These transformations and analysis are intellectual property of my own and should not be cited without appropriate attribution.

7/7/2013: Services PMI for Ireland: June 2013

Necessity is a mother of all inventions. Necessity of recent commands that those of us who care to do an in-depth analysis of Irish data have to scale back analysis of the PMIs. The reason for this is that Investec and Markit are no longer publishing in a general release any relevant data concerning the PMIs components. In the case of Services PMIs, Markit went even farther:

All that is left for any non-profit analysts like myself is to take the few numbers still being reported on an ad hoc basis, and make most of them. Sad to see years of data & analysis models going to waste because Markit & Investec don't really understand how to work with new media and independent analysts.


Here is the updated trends analysis for Services Sectors PMI (my earlier post on Manufacturing PMIs is here):

• 12mo MA for the series stands at 54.0, which is statistically indifferent from 54.9 recorded in June 2013. 
• June 2013 reading is statistically significantly above 50.0, so no denying it, the sector is expanding.
• 3mo MA currently and 54.3, which is also statistically significantly different from 50.0, and is virtually unchanged on 54.2 3mo MA through March 2013.
• The 3mo MA through June 2013 (or Q2 2013 average) is ahead of same period 2012 (50.3), 2011 (51.0) and 2010 (52.9). All pointing in the good direction, then.

Charts below illustrate the trends:

Chart above shows that, despite the robust growth, we are in a secular slowdown in underlying growth when it comes to Services sectors. In pre-crisis period, average PMI ranged 7.6 points above 50.0, which was consistent with roughly GDP growth of 4.4-4.6 percent per annum. Since the 'recovery on-set, average PMI is above 50.0 by 1.9 points, which is not statistically significantly distinct from zero growth in the sector. it is also consistent with average GDP growth of ca 1.2-1.5% per annum.

Now, keep in mind: these are Services, heavily dominated by exports-driven ICT and Financial Services - in other words, this is the sector of the economy where the 'exports-led recovery' story has been the rosiest since the 'official' end of the crisis.

Stay tuned for my combined series analysis for Manufacturing and Services PMI.

6/7/2013: Feeding that Sovereign Cash Addiction?..

When the cure might be worse than the disease?

Two charts from BBVA Research:

Notice the size (as % of GDP) for the BoJ QE and notice the composition: BoJ now bought more JGBs as proportion of GDP than the Fed bought of Treasuries in Q1+Q2+Q3. But, as the chart below shows, that is still not making much of the difference (yet) in JGB holdings: banks and insurance companies remain captive to the state debt.

6/7/2013: WLASze Part 3: Weekend Links on Arts, Sciences and Zero Economics

This the third part of my WLASze: Weekend Links on Arts, Sciences and Zero Economics posts. Links to Part 1 and Part 2.

As I said in the opining for Part 1, this is the week of July 4th, so let's revisit some of the Americana here, again. Some of my favourite imagery from the US of A, tied together by similar theme:

Arizona's Wave Rocks: Coyote Buttes ravine

Death Valley's Mosaic Canyon:

I remember hiking both of the above. Stunning beauty!


More on the theme of American water and art: Christo & Jeanne-Claude's 'Surrounded Islands' (1980-83) in Biscayne Bay, Greater Miami, Florida

h/t for the reminder of this installation to @saatchi_gallery via twitter.


From the arid and tropical USofA to arctic extremes of Kola Peninsula of Russia: "It has been said that the human race knows more about certain distant galaxies than it does about the ground that lies beneath its very feet. In fact, while it took the famous Voyager 1 satellite twenty-six years to exit our Solar System (relaying measurements to Earth from 16.5 billion km away), it took about the same amount of time for humanity to penetrate a mere 12 km into the Earth's surface."

Let's not get embarrassed by this, but we probably now even less about our neighbours next door…
Note: reference to the Voyager 1 mission referenced in Part 1 of WLASze links.


TED Talks tend to be occasionally 'political' and on some other occasions they tend to be rehasments of things we've heard about before and not necessarily pushing the boundaries of what we know into what we would like to know. Here's an exceptional example of good TED (h/t to @rszbt via twitter).

A quote: "…the general understanding is that the crisis came as a complete surprise. To the initiated, his choice of the word “cascaded” to describe the dynamics at work indicates that he has a different view. His hypotheses are
(1) Financial bubbles can be diagnosed in real-time before they end, and
(2) The termination of financial bubbles can be bracketed using probabilistic forecasts.
His underlying concept is the theory of “Dragon Kings”:
Dragon Kings represent extreme events which are “in a class of their own”. They are special. They are outliers which are generated by a specific mechanism which, as Sornette emphasizes, makes them “predictable and perhaps controllable”."

Yes, some bubbles are predictable at least in terms of being able to generate early alerts. Yes, the latest one, especially relating to property prices, was predictable, even using simple AR-based models of property prices. Yes, the propagation of the latest crisis across the balance sheets of financial institutions was also predictable. But… no - timing and extent of the crisis was probably not predictable. And yes, 'bracketed' or interval-targeted predictability is probably here, but we still have no 'turning point' power, in my view.

I like the contrast of Dragon Kings to Black Swans: "A black swan is a rare bird. Seeing it shatters all beliefs that swans should be white. The black swan stands for the idea of unpredictability and extreme events being “fundamentally unknowable”. As Sornette emphacizes, the Dragon King is “exactly the opposite” of a Black Swan, as in his concept, most extreme events are actually knowable and predictable." But the point also is that the Dragon King does not shatter our systems of belief and inquiry - it actually ex-post reinforces them. In other words, if the current crisis is a Dragon King, then the answer to the problems it posses is not in seeking new 'tools' for inquiry, but in reinforcing existent 'tools'. This point is more than coincident with my view that the systems of thinking did not fail us in this crisis, but the systems of enforcement of that thinking did - a point informed by the work I am yet to transcribe into paper format existence on AR models application in forecasting property prices dynamics (work in progress).


Staying on predictability: Nature reported on the latest breakthroughs in quantum mechanics involving the Heisenberg Uncertainty Principle (HUP). In quantum mechanics, HUP sets fundamental limit to the degree of precision which can be assigned to various complementary pairs of physical properties of particles. Classic postulation of HUP states that the more precisely we know the position of some particle, the less precisely we know its momentum, and vice versa. More on HUP here and here.


And for a happy ending to this week's links:

Christopher Wool's Minor Mishap, 2001

Wool was a major 'new blue-chip' name at Basel 2013.

And the opposite of Wool 'complex statism' - the 'arrested dynamism' of Big-Bang-Bullets in Plexiglass:

http://wordlesstech.com/2013/06/30/the-big-bang-bullets-in-plexiglass/


Enjoy!

6/7/2013: WLASze Part 2: Weekend Links on Arts, Sciences and Zero Economics

The send part of my regular WLASze (Weekly Links on Arts, Sciences and zero economics). The first part is available here: http://trueeconomics.blogspot.ie/2013/07/672013-wlasze-part-1-weekend-links-on.html


Let's start with a Prime Ministerial take on Summer in Moscow

via Russia's Dmitry Medvedev @MedvedevRussiaE on twitter and http://instagram.com/p/baqMWzA_MX/

My reports suggest that the city is, per usual in such weather, is being abandoned for dachas, which makes it great time to be in the city. Moscow has this most outstanding quality to it when it is deserted by the crowds - a city full of signs of its tremendous speed and energy, yet devoid of both. Walking its empty (well, nearly empty, as it is Moscow after all) boulevards, city centre streets, in near-solitude. A museum visited on the 'Members-only' days… a park caught in the stillness of a storm approaching… a train station in the dead of the night…

As Brodsky put it: "Loneliness cubes a man at random." (http://www.poemhunter.com/poem/to-urania/) Except in a good way...

On Brodsky's Urania (linked above) - more threading of the needle: Auden's http://poetry.rapgenius.com/W-h-auden-the-fall-of-rome-lyrics#lyric
"Altogether elsewhere, vast
Herds of reindeer move across
Miles and miles of golden moss,
Silently and very fast."


An excellent link via @farnamstreet to Clayton Christensen comments on big data and how ideas emerge interview with The Economist:
http://www.farnamstreetblog.com/2013/06/how-great-ideas-emerge/?utm_source=feedburner&utm_medium=twitter&utm_campaign=Feed%3A+68131+%28Farnam+Street%29
Quote: "most of our education is organized the same way – silos. One way for individuals to improve decisions and ideas is to intersect the main ideas from the big disciplines."
Gels with my article in last week's Sunday Times:
http://trueeconomics.blogspot.ie/2013/07/272013-sunday-times-june-30-2013-irish.html

More on the issue of links between humanities, education and sciences and relating also to my Sunday Times article from last week:
http://qz.com/98892/the-humanities-are-not-in-crisis-in-fact-theyre-doing-great/

Yet more on the same topic of broader thinking: https://theconversation.com/thinking-critically-on-critical-thinking-why-scientists-skills-need-to-spread-15005

Thinking critically on critical thinking: why scientists' skills need to spread - the article takes the half of the complete dimension in education by arguing that science skills should be spread wider across non-scientific fields of inquiry. I agree. But this is now an accepted wisdom: artists do use scientific language and tools. The opposite direction is yet to be accepted in education and academia and even applied sciences…


And here's an example of poor use of visual and signifier tools that comes from 'management sciences'. A hideously MBA-ish image of 'Inspiration' based on uninspiring clutter of pop-icons and half-finished 'thoughts' that creates more confusion than clarity and is brought to an even more striking vividness by the 'pensive' nature of an 'artsy thinker' pondering the banality over the space of an 'academist' blackboard... Yeeks!
https://www.linkedin.com/today/post/article/20130611015532-15077789-8-simple-ways-to-inspire-yourself-at-work?_mSplash=1



Stay tuned for more links in part 3 forthcoming tonight.

6/7/2013: WLASze Part 1: Weekend Links on Arts, Sciences and Zero Economics

Given that this week is the 4th of July week, it is probably apt to start my WLASze: Weekly Links on Arts, Sciences and zero economics instalment with a bit of Americana.

And so we shall.

On sciency-bit side - an awe-inspiring story of a 35-years-old-and-still-running scientific journey: http://www.nytimes.com/2013/06/28/science/space/going-going-still-going-voyager-1-at-solar-systems-edge.html?_r=0
My favourite quote: "…when the two Voyagers launched in 1977 on a grand tour of Jupiter, Saturn, Uranus and Neptune, the space age was just 20 years old, and there was no way to know that NASA had built something that would last 35 years…" Now, recall the life span of your iPhone… 35 months?.. near, not even that. And to that: Happy Birthday, America!


But while on the topic of space, fascinating images from arstechnica on ISS workings:
http://arstechnica.com/science/2013/07/gallery-the-international-space-station-flight-control-room/#image-1 The logos above the Mission Control Center and the typography of the sign are a bit OTT… like, tacky. The second and third images are brilliant: it takes fewer computers and people to run the ISS than to execute a mildly sizeable hedge fund management strategy… The amazing bit is that these guys are managing equipment that is largely Russian-designed and built, floating out in space and manned by all sorts of crews, so Big Respekt!


Via @stephenkinsella - an absolutely amazing, comprehensive and exhaustive visualisation of univariate distributions linkages: http://www.math.wm.edu/~leemis/chart/UDR/UDR.html . You can scroll over the defined distributions of the right hand side to 'focus' on their respective clusters: a list of 76 probability distributions formed by 19 discrete and 57 continuous ones. Screw Tall Ships and Star Wars posters! I know, I want to print this one out on a 'blackboard' paper like 3x3 meters-sized for Luca's room.


On the arts side: "Until It Makes Sense" is an encounter with the work of Mario García Torres at Dublin's Project Arts Centre http://ht.ly/mD7lK . Worth a visit. Here's an interview with Torres in line with this 2007 Stadelijk Museum show: http://www.flashartonline.com/interno.php?pagina=articolo_det&id_art=90&det=ok&title=MARIO-GARCIA-TORRES

An interesting reference to "John Baldessari’s rendition of Sol LeWitt’s Sentences On Conceptual Art" - http://www.artic.edu/aic/collections/artwork/189072 Baldessari's 1972 work.
I prefer Baldessari as a conceptual photographic artist, with works like here: http://www.muralsoflajolla.com/john-baldessari-mural/

and Classic Baldessari:

Staying with art: Arte Laguna - a regular international competition "aimed at promoting and enhancing Contemporary Art" and held at Venice Arsenale was announced for 2013-2014: http://www.artelagunaprize.com/index.php/prize.html
with exhibition to be held 9 October-30 October 2013.

Here are some of 2012 winners. A brilliant recomposition of classical pastoral narratives using photography as the medium to replicate the texture, light and colour gamma of oil by Linda Pottage:
http://www.artelagunaprize.com/index.php/component/content/article/985-linda-pottage.html
In larger size, and including her other work:

Amazingly fluid and, obviously, dynamic structure, reminiscent of 3D plots you might get in Mathematica… or the 'Regression Machine' one of my econometrics professors at UCLA used on us (not a very happy memory of tortured geekiness) by Jill Townsley:
http://www.artelagunaprize.com/index.php/component/content/article/986-jill-townsley.html

Source on 2012 show: http://bellezzedarte.wordpress.com/2013/03/30/la-mostra-dei-finalisti-premio-arte-laguna/

Another excellent work: Jaspal Bir's oil:

Stay tuned - more links will be forthcoming in Part 2.

5/7/2012: Epically scary chart

Via Calculated Risk:

Basically, since 1981 recession, duration of the subsequent jobs losses has been longer and longer and longer. The duration spread has risen from 3 months between  1981 and 1990 recessions, to 14 months between 1990 and 2001 episodes to now 19 months and still counting. At current run rate, we are looking at 77-78 months duration and this will bring the spread to ca 33 months.

Thus spreads: 3-->14-->33.

4/7/2013: IMHO Letter to Governor Honohan

Updated:

Here's this week's letter to the Governor of the Central Bank of Ireland from the IMHO on the topic of Declaration of Last Resort for Family Home Repossessions (you can click on each image to enlarge):

4/7/2013: Jobs Creation by State Agencies

Per press reports today: "IRELAND'S enterprise development agencies created nearly 9,000 net jobs in 2012, new statistics outlined." The reports reference the findings of the Forfas 2012 Annual Employment Survey (linked at the bottom) which showed that "total permanent full-time employment in agency-assisted companies operating in all sectors amounted to 294,785 in 2012, a net increase of 8,975 jobs or 3.1pc."

The quoted statement above is nonsensical and should not have been made. Here's why:

1. These jobs were created by companies working with the agencies, not by agencies themselves. In simple terms, "Ireland's enterprise development agencies" have not created any of these jobs, although they might have been helpful in bringing these jobs to Ireland or helping companies in developing activities that resulted in these jobs creation. 
2. In some instances, working with the agency involves not much more than obtaining an investment from an agency-supported fund that is not actively administered or managed by the agency. In this case, a company 'client' of the agency does not have much of an engagement with the agency at all. In a sense, such jobs creation by the agency amounts to the jobs creation by the financial investors - they provide funds for jobs that are to be created - with or without them, sometimes - but they do not actively 'create' jobs.
3. Net jobs created claim relates to gross increase in total employment during 2012 over 2011 final figure. This increase in its entirety does not accrue to the company activities with the agencies. For example, a mature enterprise can be engaged with an agency in developing new markets for exports. The enterprise might hire new workers for work totally unrelated to its engagement with the agency. Should the credit for these jobs additions go to the agency? Let's put this differently: suppose you broker a deal between companies 1 & 2 to purchase good X by 1 from 2. Should you get credit for company 1 buying from company 2 good A as well? 
4. Net jobs creation on the year 2011 assumes that these are new jobs added. This is also not true. It might be a job that replaces a layoff or redundancy that took place in 2011, but was not filled for 3-4 (or longer) months and thus hiring took place in 2012. What happens? Level of 2011 employment that serves as a base decreases by 1 job, level of employment in 2012 increases by 1. New jobs created = zero, yet Forfas study reports a net jobs creation of 1.
5. The survey includes Ireland-based MNCs, which have multi-annual jobs rolls, so the point (4) above applies to their activities even more significantly than for domestic enterprises. 5,747 of the 8,975 jobs were 'created' in foreign-owned MNCs
6. The survey also includes a number of larger internationally-trading Irish firms. Some of the jobs added could have been created and announced before the company was engaged with the state agency, but their filling was delayed until 2012 when the company was engaged with the agency.
7.  Many of the firms covered in the survey are mature and established firms and are no longer 'assisted' in any meaningful way by the state agencies, since they have long-term established operations in Ireland. A standard practice in business is when a broker of a deal gets a commission for the deal. The broker usually ceases to be compensated for any future deals signed by the two companies engaged in the original transaction once the original transaction is over. In the case of the Irish state agencies, the credit seems to flow unabated regardless of whether their work does directly contribute to the jobs creation or not.
8. In some cases, 'net jobs created' by agencies-assisted companies can be actually poorly accounted jobs rotations within the economy. Example: an agency providing outsourcing service to, say, Nama moves into the country assisted by one of the international FDI agencies in the state. It creates 100 jobs that are counted as new. Yet it takes on 100 staff from the previously closed domestic agency that was not assisted by the agency. Net jobs creation in state agencies assisted companies +100. Net jobs creation in Irish economy = 0.

These are at least some of the reasons why both the 8,975 jobs additions can be questioned and why in general none of these jobs were 'created' by the state agencies and not all of these jobs relate to the activities with which the state agencies are engaged.

There is also a reason to question the very word 'permanent' jobs. If they are permanent, then why has the employment levels in agencies-assisted firms still running below 2006 peak? Permanent is permanent, right?

And it really is not needed to make silly statements of this sort - some of the agencies - e.g. EI and IDA - are doing excellent work in many areas and are wanting in other. This is natural for any agency and any enterprise. The point is not to brow-beat them for the latter nor to ignore it, and it is also not to over-praise them for the former. What is needed is more precise and more transparent accounting and reporting. Alas, Forfas doesn't really deliver on that and never did. Instead we have a report full of chart, numbers and tables that offer little deep insight and even less real analysis.

Full Forfas report is here: http://www.forfas.ie/media/04072013-Annual_Employment_Survey_2012-Publication.pdf

4/7/2013: Blackrock Institute Surveys: North America, Europe and EMEA: June 2013

Two charts showing most recent consensus expectations on North American, Western European and EMEA economies from the Blackrock Investment Institute panel of economists (note: these do not represent views of Blackrock).

Notice clustering of peripherals and France, as opposed to marginally better clustering of the Netherlands, Sweden, Belgium and Eurozone.

Note Ukraine as the sick man of the region. Also note Slovenia and Croatia - two EU economies that are significantly under-performing the regional grouping.

4/7/2013: Blackrock Institute Surveys: North America, Europe and EMEA: June 2013

Two charts showing most recent consensus expectations on North American, Western European and EMEA economies from the Blackrock Institute panel of economists (note: these do not represent views of Blackrock).

Notice clustering of peripherals and France, as opposed to marginally better clustering of the Netherlands, Sweden, Belgium and Eurozone.

Note Ukraine as the sick man of the region. Also note Slovenia and Croatia - two EU economies that are significantly under-performing the regional grouping.