The OECD, in its current General assessment of the macroeconomic situation of the global economy, gives 2 Tables, A1a and A1b, titled Indicators of potential financial vulnerabilities. These tables list 12 categories of macroeconomic activity that could warn of financial vulnerability. They are:
- Potential GDP growth rate – actual GDP growth rate differential, 2012
- Actual unemployment rate – NAIRU differential, 2013 Q2
- Current account deficit , 2012 
- Relative unit labour cost, 2000Q1-13Q2 
- Household gross debt, 2012 
- Non-financial corporation gross debt, 2012 
- Real house prices, 2000Q1-13Q2 
- Core Tier-1 capital required to reach 5% of assets in selected banks 
- Nonperforming loans to total loans, latest
- Financial corporation gross debt, 2012
- Headline government budget deficit, 2012
- Gross government debt, 2012
- Real 10-year sovereign bond yield-potential GDP growth rate differential, 2013Q3
The tables group the four weakest countries in a category by colour. We instead give a numeric weight of . They similarly group the next four weakest countries to which we assign a weight of . If a country is not in the top eight of a category, it receives no weight for that category. We add the weights across all categories to get a relative threat assessment for the OECD countries.
In the list above, out of the 40 OECD countries, Ireland is the most vulnerable with a weight of 14 followed by Greece with 12 and Portugal with 10. Tied for 4th place with a weight of 8 are Spain, the United Kingdom and Canada.
It is ironic that Canada ranks among the PIIGS as the most vulnerable, and ahead of Italy that has a weight of 7. Canada’s greatest vulnerabilities, unit labour costs and house prices should be viewed in the context of the move to increase Ontario’s minimum wage by 37% (Raise minimum wage in Ontario to $14 per hour: New union says) and a housing market that has been linear up (Tracking Canadian House Prices). The second area of vulnerability is in the high levels of corporate and household debt. When interest rates begin to rise, the impact on economic growth will be severe as indebted entities cut back consumption and capital spending to meet increased debt servicing costs.
There are indeed thunderclouds on the horizon, the wind is picking up and storms are already sweeping through the PIIGS. Canadians should not be too smug. A Hard Rain’s A-Gonna Fall. (Sorry we couldn’t include a YouTube video of Dylan’s song.)