OECD: “There are risks of persistent stagnation over the Eurozone”

Juncker and Rajoy

The document notes a ‘vicious circle’ stemming from weak forecasts in potential growth, which make firms and consumers more hesitant to invest or spend. A lack of demand will erase even more activity, and fiscal consolidation or cuts on the expenditure side will not be enough to avoid the risk of stagnation.

After hiring Catherine L. Mann as chief economist, the OECD supports the implementation of comprehensive reforms to boost investment and consumption and is also committed to ensuring gains throughout society.

“Restoring healthy growth will require determined and systematic action across a wide range of policy areas” Alain de Serres said. The head of the OECD Structural Policies Surveillance detailed the need to “break that circle of weak demand and weak potential feeling that are reinforcing each other”.

This new agenda could benefit some European countries. Greece, Italy, Portugal, Slovenia and Spain were quoted as examples where the quality of higher education is lower than other Member States and should be resolved.

Another policy action could be to carry on with pending reforms on product markets, which would also help household and SME balances.

There should be an “easing of regulatory barriers to competition”, according to Serres, “in particular in services and energy and telecomunication industries, where there is progress, but they could go further”.

EU countries will benefit from the recently launched European Fund for Strategic Investment included in the Juncker Plan, and could use it to put some of these recommended reforms into practise. The EC President was in Madrid, promoting the energetic interconnections summit between Spain, France and Portugal.

“A unique process of regional convergence on energy, one which I would like to see more and more of across Europe. We have paved way for new investments”, Juncker declared.

A member of the European Popular Party, the main political force in building up the austerity architecture, underpined this new path in Brussels in the presense of the OECD delegation. The Polish economist and MEP, Dariusz Rosati, opened the door for reforms in the service sector and highly regulated jobs, as opposed to lowering employee protection.

About the Author

Alexandre Mato
Alexandre Mato covers European affairs from Brussels. Former Editor in-chief of Cierre de Mercados, he was the first ever editor on Spanish TV appointed under the age of 30. He has a degree in Journalism and a postgraduate in International Relations, both from Universidad Complutense de Madrid.

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