OECD chief pushes for €1 trillion rescue fund
Organisation calls for ambitious programme of reforms to boost eurozone economies.
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The head of the Organisation for Economic Co-operation and Development (OECD) has said that the eurozone still faces “daunting” challenges and that its rescue fund should be doubled to €1 trillion.
Angel Gurría, the OECD’s secretary-general, made his announcement as he presented the organisation’s economic surveys of the European Union and eurozone today (27 March).
Gurría said that countries’ current level of commitment to the eurozone’s firewall was “not enough to restore market confidence”.
The lending capacity of the European Stability Mechanism (ESM), the permanent rescue fund, is capped at €500 billion but finance ministers are to meet on Friday (30 March) to discuss whether to raise that level.
Angela Merkel, Germany’s chancellor, accepted for the first time yesterday (26 March) that the ESM could be merged temporarily with the European Financial Stability Facility (EFSF) to bring the firewall up to about €700bn.
However, this would still fall some way short of the OECD’s recommendation, as well as that of the European Commission, which favours an option that would bring the lending capacity up to €940bn.
‘Daunting challenges’
The two OECD reports show that steps taken in some of the eurozone’s struggling countries, notably Greece, Italy, Portugal and Spain, were having an impact but, Gurría said, “the challenges remain daunting”.
The OECD said that the economic, fiscal and financial imbalances of the eurozone had led to weak bank balance-sheets, high unemployment and low growth.
“Weak financial conditions, fiscal consolidation and economic adjustment are restricting demand in the short-term before the long-term benefits on stability and growth are felt,” Gurría said.
In the reports the OECD calls for “an ambitious programme of reforms” in product and labour markets, tax systems and education to rebalance the economies, restore competitiveness, boost growth and bring down high levels of unemployment – particularly among the young.”
“Europe is stalling. It needs to get out of first gear and make growth the number one priority,” Gurría added.