OECD joins IMF in calling for more infrastructure funding
The Organisation for Economic Cooperation and Development (OECD) has warned the fragile global recovery is at risk from the eurozone and joined the International Monetary Fund (IMF) in calling for greater infrastructure investment.
The latest Economic Outlook from the OECD foresees a small decline in global GDP growth this year before it picks up in 2013, moving from 1.6% to 2.2%.
However, an analysis of the recovery has found it “fragile, extremely uneven across different regions and could be derailed by the crisis in the euro area”,
Angel Gurría, secretary-general of the OECD, says: “With slow growth, high unemployment and limited room for manoeuvre regarding macroeconomic policy space, structural reforms are the short-run remedy to spur growth and boost confidence.”
The OECD has recommended a series of measures designed to stimulate growth including; comprehensive structural reforms; a eurozone firewall to prevent contagion; and making better use of European Central Bank balance sheets. (article continues below)
The economic thinktank did not go as far as the IMF in recommending either a cut in the base rate nor further quantative easing but did stress the importance of increasing European Investment Bank funding for infrastructure projects.
If such an initiative was to be launched in tandem with the issuance of new jointly guaranteed government bonds to help recapitalise banks, it could open up the possibility of euro-bonds once again.
“A further boost to confidence could be obtained if euro area countries were to announce and commit to implement such reforms in a coordinated and parallel fashion, signalling enhanced coordination”, reports the OECD.
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