OECD: World faces dangerous economic cocktail

The world faces a “dangerous” cocktail of low growth and high unemployment, OECD chief Angel Gurria said Tuesday, after the global body warned of gloomier prospects for major economies. The Organization for Economic Cooperation and Development, in its latest global overview, said this month that leading indicators for the 34-nation body point to “weakening growth in coming quarters” for most major economies. “You have a problem of high unemployment especially among the youth – growing inequalities and low growth – and in some cases contracting growth,” Gurria said at an OECD conference in New Delhi on measuring global well-being. “Like the James Bond cocktail – when you shake together and do not stir – you have a very, very dangerous combination,” he told a news conference. Some 50 million people are unemployed in OECD countries – 15 million more than in 2008 at the onset of the global financial crisis, he said. “Five years on, it is still ongoing,” added Gurria, secretary-general of the Paris-based organization that groups leading industrialized democracies. Unemployment in Greece is at a record 25.1 percent as its economy contracts, while in Spain the jobless rate is 24.6 percent as the government implements austerity measures to fend off a sovereign bailout. The gap between rich and poor is now at its widest in 30 years with governments facing a loss of confidence in their ability to deal with boosting growth, tackling debt and making the financial sector stable, Gurria said. But he also said there also were signs of progress in tackling Europe’s debt crisis. Gurria praised the European Central Bank’s plan to launch a bond purchase scheme for debt-wracked countries to safeguard the euro that has spurred hopes the financial crisis can be beaten. “It showed they [the ECB] had the muscle power, the bazookas” to help turn around market sentiment towards the euro and stabilize markets,” the OECD chief said, and he added that a eurozone “banking union is now on the table.” Eurozone leaders earlier this year agreed to common supervision of lenders by January 2013 – a step toward joint bailouts of troubled banks and safeguarding depositors’ money. But there is still discord over the scope of the banking supervisor’s powers as well as the timeframe. “It [the banking union] is going to happen – not now – but maybe in January 2014,” Gurria said later. At the same time, to avert another blow to the global economy, he said it was vital the U.S. Congress clinches a deal on the “fiscal cliff” facing the U.S. – automatic budget cuts and higher taxes due to take effect in January. Lack of agreement on averting or at least postponing the measures would “put the U.S. economy into recession” and the global economy would also suffer, he warned.