European Commission report flags 12 countries of concern

A new "Alert Mechanism Report" from the European Commission looks at macroeconomic data from across the continent and labeled 12 countries as warranting further scrutinty, including four of the continent’s five largest economies. The AMR is part of legislation aimed at bolstering economic surveillance in countries beyond those — Greece, Ireland, Portugal and Romania — that are already under examination as part of assistance programs. The indicators examined included current account balance, export market shares, hous prices, private and public sector debt, and unemployment rates, among others. 

The countries in need of "further in-depth analysis" are: Belgium, Bulgaria, Denmark, Spain, France, Italy, Cyprus, Hungary, Slovenia, Finland, Sweden, and the United Kingdom.  The report notes:

The identified Members States have different challenges and potential risks including
spillover effects. Some Member States need to correct accumulated imbalances on both the
internal and external side. They will have to reduce high levels of overall indebtedness and
regain competitiveness so as to improve their growth prospects and export performance. In-
depth analysis will help to assess the drivers of productivity, competitiveness and trade
developments as well as the implications of the accumulated level of indebtedness and the
degree of related imbalances in several Member States. Some countries are experiencing rapid  adjustment partly due to catching-up effects and these developments may require a closer  examination. Despite overall good macroeconomic performance  some countries display  developments in asset markets, including in particular housing, and a continuous build-up of  indebtedness in the private sector, which also warrant further analysis.  

EUobserver reports that the report was originally going to single out Italy, Spain, Hungary and Cyprus as "pressing cases" but, possibly due to pressure from Italy’s new government, it lumped all 12 countries into the same category:  

Based on ten indicators such as housing prices, private loans, public deficit and export performance, the report initially singled out Italy, Spain, Hungary and Cyprus as "pressing cases". But in the final version, all 12 countries were put in the same basket, even though housing bubbles and increased private debt in Denmark and Sweden are less of a problem than Rome’s high public indebtedness.

According to Il Sole 24 Ore newspaper, Italian Prime Minister Mario Monti, a former EU commissioner, put pressure on the college of commissioners to water down the language of the report ahead of a treasury bonds sale in Rome on Friday.

Unfortunately for Monti, watering down bad news only works if nobody knows you’re watering it down.