Happy New Year Euro Zone. Now Reform.

December 31, 2013, 5:07 AM ET

ByDavid Cottle

It’s been quite some time since the euro zone could look a New Year in the eye with quite the straight and level gaze it can in dawning 2014.

Chatter about the currency’s implosion has been largely stilled in the mainstream of market discourse, largely restricted once again to dark corners from whence perma-skeptics have always prophesied eurogeddon. Bailed-out Ireland is returning to the bond markets, proving that redemption is possible even for grievous former sinners.  The long-vexed question of what to do about future failed banks even has a blueprint for resolution.

Sure there are still problems, big ones. Unemployment is too high, growth is too low, while the currency itself is too strong for many peripheral economies, and, increasingly France, whose economic divergence with Germany is becoming too obvious to cover up.  But still, the euro zone is a more stable place than it was at the start of either 2013, or 2012.

However, (you knew there was a ‘however’ coming here, didn’t you?), the euro zone’s structural reform* is still far too glacial.  We know this partly because European Central Bank chief Mario Draghi urges it on the bloc’s economic laggard states at least once a month. His subtext is obvious enough: the ECB can buy you time, but for heaven’s sake use it, and make your economies more competitive.

So far, he has met with rather limited success.

Despite a faster pace of reform in recent years, Europe. and in particular its southern fringe, is the most “structurally compromised” of economies within the Organization for Economic Cooperation and Development, according to Russell  Jones, former global head of fixed income strategy at Westpac, and now working for Llewellyn Consulting in London.

Along with head of house John Llewellyn, an old Lehman Brothers and OECD hand, he’s come up with a rather good chart which shows the ‘heat map’ of structural policy reform within the euro zone.

Above-average scores for each category of structural performance are green; the darker the tone, the better the performance. Below-average scores are red. Well, take a look. The splits here are clear enough.

Turning this chart green throughout is the euro zone’s major challenge, and, even with all of 2013′s clear improvements, the job has barely been started. A peripheral population short of jobs and tired of austerity isn’t going to make it any easier in 2014.

*For a concept so readily bandied about, ‘structural reform is rarely defined. Here’s what Llewellyn Consulting means by it: “Our preferred working definition is “Policies that encourage, or at least do not inhibit, the flow of resources from declining and less productive activities to growing and more productive activities, and which leave economies better able to absorb shocks”. In short: policies that increase economies’ and societies’ capacity to adapt to change.”