PARIS (MNI) – Prospects for the global economy have deteriorated
since late autumn and they depend now more than ever on political
leadership to restore confidence, OECD Secretary General Angel Gurria
said Monday.
With unemployment rising, financial market tensions persisting, the
Eurozone apparently already in recession and a resolution of the Greek
crisis “now in doubt,” the credit ratings downgrades of several euro
area countries announced late Friday create the ingredients for a
“perfect storm”, Gurria said at a conference here on “risk countries.”
The OECD’s November forecasts, which projected growth of 1.6% in
the advanced economies this year, were “blown out of the water” within
48 hours by the default of MF Global and Athens’ announcement of a
referendum on its bailout strategy, Gurria said, suggesting that his
institution’s darker scenario has now become more realistic.
“It all comes back now to political action to restore confidence,”
he argued, urging that the EU accord for a fiscal compact be applied
“swiftly and decisively.”
Ambitious medium-term fiscal consolidation in Europe must be
flanked by structural reforms, for example to reduce rigidities in labor
and product markets, Gurria said, arguing that previously there was “no
medium- and long-term perspective to the short-term remedies imposed.”
“More growth-friendly” programs are needed to boost efficiency in
the public sector, he said.
On the fiscal side, governments should follow the example of France
and Germany by focusing on reducing numerous tax exemptions and on tax
evasion, before resorting to tax hikes, he said. It is also “the right
moment” to introduce taxes on “public bads” like pollution, he said.
In addition, policy should focus on the social fallout from the
economic crisis, starting with youth unemployment, Gurria said. It is
not enough to “go structural” — governments must also “go social”, he
said.
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