Brussels, 31/03/2015 (Agence Europe) - The OECD says the only way the European Union can return to sustainable growth is by pursuing structural reforms.
“Structural reforms are the only solution. Everything else has been exhausted”, said OECD secretary general Angel Gurria, mentioning the currently very low interest rates and high levels of public debt that are blocking any budget stimulus policies. He was speaking at an economic dialogue with the European Parliament's economic and monetary affairs committee on Tuesday 31 March. With the launch of quantitative easing (QE) by the ECB, “monetary policy can buy time but only governments can take structural reforms that can revive growth and put the economy on a sustainable path”, he said, warning that “low growth, income inequality and a high level of young unemployment translate into very big erosion of trust in institutions”.
The OECD says that member states' economic policy priority should be to stimulate growth in areas of the future such as the digital economy and energy through investment in “education and innovation” and the Juncker Plan (which is supposed to drum up €315 billion in extra private growth over the next three years). Gurria said the plan was welcome, but would not fix all of Europe's problems and needs to be accompanied by a lifting of “regulatory barriers”. He thought growth should also be stimulated through regulation to ensure greater liberalisation of the economy and to transfer the fiscal burden of labour to the consumer and products or services that damage the environment. Gurria, who used to be Mexico's finance minister, said the EU's services directive had not yet provided much in the way of results at this stage.
In response to Marian Harkin (ALDE, Ireland) who asked how to tackle poverty, which affects 9% of people in work in Ireland, Gurria said Ireland was “rather a good case of an economy that is growing the fastest” after applying a structural adjustment programme as part of its bailout. He praised Spain's performance, which created 430,000 new jobs in 2014 through root-and-branch reform of the labour market. Gurria also praised the courage of the Italian government in passing the Jobs Act.
When it comes to reform of the structure of the banking sector, Gurria supported the work to separate retail and investment banking in order to protect savers from heavy losses from the markets. He said there should be separation “as long as it is transparent and very clear on the balance sheet”. (Mathieu Bion)