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PRESS BRIEFING ON THE ECONOMIC OUTLOOK AND POLICY REQUIREMENTS FOR G20 ECONOMIES BY ANGEL GURRIA, SECRETARY-GENERAL, OECD – PARIS, OCTOBER 31 2011 -

 

BOLD DECISIONS ARE NEEDED FROM THE G20 LEADERS MEETING IN CANNES THIS WEEK TO GET THE GLOBAL ECONOMY BACK ON TRACK, SAID OECD SECRETARY-GENERAL ANGEL GURRIA TODAY IN PARIS DURING A PRESS BRIEFING ON THE ECONOMIC OUTLOOK AND POLICY REQUIREMENTS FOR G20 ECONOMIES.

 

AN IMPORTANT FIRST STEP HAS ALREADY BEEN TAKEN WITH THE DEBT AND BANKING CRISIS RESCUE PLAN ANNOUNCED BY EU LEADERS ON OCTOBER 26 2011, BUT THESE MEASURES MUST BE IMPLEMENTED  » PROMPTLY AND FORCEFULLY », HE ADDED.

PRESENTING A SPECIAL BRIEFING NOTE AHEAD OF THE CANNES SUMMIT, Mr GURRIA SAID WITHOUT DECISIVE ACTION THE OUTLOOK IS GLOOMY. THE OECD PROJECTS GDP GROWTH TO REMAIN WEAK IN THE ADVANCED G20 ECONOMIES OVER THE NEXT TWO YEARS WHILE THE PACE OF ACTIVITY IN THE MAJOR EMERGING MARKETS IS LIKELY TO BE LOWER THAN IN THE PRE-CRISIS PERIOD.

TO Mr GURRIA, UNCERTAINTIES REGARDING THE SHORT-TERM ECONOMIC OUTLOOK HAVE RISEN DRAMATICALLY IN RECENT MONTHS AND UNEMPLOYMENT IS SET TO REMAIN HIGH IN MANY ADVANCED COUNTRIES. A BETTER UPSIDE SCENARIO CAN MATERIALISE IF THE POLICY MEASURES THAT WERE ANNOUNCED AT THE EURO SUMMIT OF 26 OCTOBER ARE IMPLEMENTED PROMPTLY AND FORCEFULLY. IN CONTRAST, THE OUTLOOK WOULD BE GLOOMER IF THE COMMITMENTS MADE BY EU LEADERS FAIL TO RESTORE CONFIDENCE AND A DISORDERLY SOVEREIGN DEBT SITUATION WERE TO OCCUR IN THE EURO AREA WITH CONTAGION TO OTHER COUNTRIES, AND/OR IF FISCAL POLICY TURNED OUT TO BE EXCESSIVELY TIGHT IN THE UNITED STATES.

TO Mr GURRIA, THE APPROPRIATE POLICY RESPONSES ARE :

  1. TO RESOLVE THE EURO AREA CRISIS, IT IS IMPORTANT TO CLARIFY AND IMPLEMENT FULLY AND DECISIVELY THE MEASURES ANNOUNCED ON 26 OCTOBER TO BREAK THE LINK BETWEEN SOVEREIGN DEBT AND BANKING DISTRESS, TO DEAL WITH GREECE, TO ENSURE THAT THE SOVERIGN DEBT CRISIS DOES NOT SPREAD TO OTHER EUROPEAN COUNTRIES AND TO SECURE APPROPRIATE CAPITALISATION AND FUNDING FOR BANKS.
  2. IN THE ADVANCED G20 ECONOMIES, INTEREST RATES SHOULD REMAIN ON HOLD OR, WHERE POSSIBLE, BE REDUCED NOTABLY IN THE EURO AREA. CENTRAL BANKS SHOULD CONTINUE TO PROVIDE AMPLE LIQUIDITY TO EASE FINANCIAL MARKET TENSIONS. FURTHER MONETARY RELAXATION, INCLUDING THROUGH UNCONVENTIONAL MEASURES, WOULD BE WARRANTED IF DOWNSIDE RISKS INTENSIFY. IN THE EMERGING-MARKET ECONOMIES, THE STANCE OF MONETARY POLICY SHOULD BE GUIDED BY THE OUTLOOK FOR GROWTH AND INFLATION, WHICH REMAINS COMPARATIVELY HIGH.
  3. STRONG, CREDIBLE MEDUIM-TERM FRAMEWORKS FOR FISCAL CONSOLIDATION AND DURABLE GROWTH ARE NEEDED TO RESTORE CONFIDENCE IN THE LONGER-TERM SUSTAINABILITY OF THE PUBLIC FINANCES AND TO BUILD BUDGETARY SPACE TO DEAL WITH SHORT-TERM ECONOMIC WEAKNESS. THOSE ADVANCED ECONOMIES WITH SOUNDER PUBLIC FINANCES CAN PROVIDE ADDITIONAL COUNTER-CYCLICAL SUPPORT.
  4. STRUCTURAL REFORMS ARE ESSENTIAL TO BOOST THE GROWTH POTENTIAL OF G20 COUNTRIES, TO TACKLE HIGH UNEMPLOYMENT AND TO REBALANCE GLOBAL DEMAND. IN VIEW OF WEAK GROWTH IN THE NEAR TERM AND IMPAIRED FISCAL POSITIONS IN MOST ADVANCED ECONOMIES, PRIORITY SHOULD BE GIVEN TO REFORMS THAT OFFER COMPARATIVELY STRONG SHORT-TERM ACTIVITY GAINS AND FACILITATE LONGER-TERM FISCAL CONSOLIDATION.
  5. IN CANNES, G20 LEADERS WILL DISCUSS AN ACTION PALN WITH BOLD COMMITMENTS FOR MUTUALLY REINFORCING MACROECONOMIC POLICIES AND STRUCTURAL REFORMS. IN 2008, G20 LEADERS ROSE TO THE CHALLENGE WITH A CLEAR AND COHERENT PLAN AND WE AVOIDED A SECOND GREAT DEPRESSION. TODAY, THE ADOPTION AND IMPLEMENTATION OF THE ACTION PLAN IS JUST AS MPERATIVE TO RESTORE CONFIDENCE THROUGH DECISIVE ACTIONS IN SPECIFIC COUNTRIES AND REGIONS.

SOURCE : OECD’S MEDIA DIVISION- PRESS BRIEFING ON THE ECONOMIC OUTLOOK AND POLICY REQUIREMENTS FOR G20 ECONOMIES BY ANGEL GURRIA-SECRETARY GENERAL, OECD – PARIS, 31 OCTOBER 2011.

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