OECD warns eurozone crisis stunting global recovery

Europe came under mounting pressure Tuesday to take action to boost growth as the OECD warned that the eurozone crisis has worsened and poses the greatest risk to a recovery for the global economy.

On the eve of a European summit, the head of the International Monetary Fund added her voice to a chorus of calls for decisive moves after US President Barack Obama called for more coordination.

European stock markets however rallied, taking hope the clamour would trigger clear action by EU leaders despite their differences, although struggling Spain saw its borrowing costs rise as it raised 2.5 billion euros ($3.2 billion) in a debt auction.

In its latest report, the Organization for Economic Development and Cooperation held its forecast for global growth this year steady at 3.4 percent.

But it lowered its outlook for the eurozone to a 0.1 percent contraction, urging more easing of monetary policy and euro-wide measures to boost growth.

"The crisis in the euro area has become more serious recently, and it remains the most important source of risk to the global economy," OECD chief economist Pier Carlo Padoan warned.

The policy forum of 34 advanced economies forecast that global growth would pick up to 4.2 percent in 2013 and 0.9 percent in the eurozone, provided it contains the debt crisis.

While the eurozone gained some breathing space at the beginning of the year from the European Central Bank pumping over a trillion euros into banks, tensions have soared in recent weeks after inconclusive elections on May 6 raised the spectre of a Greek exit from the euro.

There is no guarantee that Greeks will next month elect parties committed to pursuing austerity policies required under its massive international bailout and key to keeping it in the euro.

"Elections in a number of euro area countries have signalled that reform fatigue is increasing and tolerance for fiscal adjustment may be reaching a limit," Padoan noted.

But leftist leader Alexis Tsipras, whose Syriza party came in a surprising second in the May vote, said Greece would remain in the eurozone if the radical left were to win upcoming elections.

"I do not think that a rejection of the austerity programme means that the country would have to leave the eurozone," he said, during a visit to Germany to appease those who fear his party reaching power.

"We will try to find solutions at a European level and I am convinced we will be able to succeed," he said.

With EU leaders meeting in Brussels on Wednesday to contemplate measures to boost growth, the OECD said "credibility and confidence would be enhanced by euro area and EU-wide measures".

In particular it suggested issuing "new jointly-guaranteed government bonds to help recapitalise the banking sector and encourage the write-off of bad loans," an issue that is threatening to drag Spain into needing a bailout.

Issuing so-called eurobonds has been a hot-botton issue, and Germany reiterated its opposition.

"This is not a new discussion ... we think it is the wrong way," a German government source told reporters in Berlin. "This is a fundamental position and it also won't change..." he added.

French Foreign Minister Laurent Fabius said differences of opinion were not fundamental and that he hoped the informal summit "would bring the points of view closer together."

New French President Francois Hollande, who met with Greece's Socialist leader Evangelos Venizelos in Paris on Tuesday, has called for a growth pact to complement the EU fiscal pact, pitting him against Merkel who has pushed for euro nations to slash spending.

IMF chief Christine Lagarde came out strongly on Merkel's side.

"More needs to be done in relation to supporting growth, particularly by way of structural reforms, certainly not by way of suggested stimulus," Lagarde said at a press conference in London on Tuesday.

In an effort to demonstrate a new resolve to address growth, the EU clinched a deal Tuesday to launch so-called "project bonds", using 230 million euros in its budget to raise billions for cross-border infrastructure schemes aimed at firing up economies.

Under a deal approved by the European parliament and the presidency, that still needs agreement from the 27 member states, a pilot phase on European project bonds could be launched as soon as July.

"230 million euros is not that much, but with a multiplier effect expected of between 15 and 20 times in some cases ... this is a positive start," Swedish Socialist MEP Goran Farm said.

Italian Prime Minister Mario Monti meanwhile warned fiscal discipline alone is "unsustainable" without economic growth, adding that the G8 talks in Camp David in the US last weekend had given a message "that Europe will have to take into account."

Obama on Monday urged Europe's leaders to get onto the same page.

"What is most important is that Europe recognises this euro project involves more than a currency, it means that there must be more effective coordination" on fiscal and growth policies, he said.


Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • Anguished families make 'last visit' before Indonesia executions
    Anguished families make 'last visit' before Indonesia executions

    Relatives of two Australian drug smugglers on death row in Indonesia cried out in anguish as they arrived at a prison island Tuesday, in distressing scenes as they paid what could be their final visit to the condemned men ahead of their executions. Myuran Sukumaran and Andrew Chan, ringleaders of the so-called "Bali Nine" heroin-trafficking gang, are among eight foreign drug convicts who are expected to face the firing squad imminently after authorities gave them formal notice of their …

  • Celebrities urge Australia PM to do more to save execution pair
    Celebrities urge Australia PM to do more to save execution pair

    Celebrities including Oscar winner Geoffrey Rush released a video Tuesday urging Australian Prime Minister Tony Abbott to fly to Indonesia to help save two citizens facing execution, forcing the government to defend its tactics. "Bali Nine" drug traffickers Myuran Sukumaran and Andrew Chan could face the firing squad within hours, along with others from Brazil, Nigeria, the Philippines and an Indonesian prisoner. Australia, Indonesia's close neighbour, has mounted a sustained diplomatic …

  • ISIS has not penetrated Phl – AFP
    ISIS has not penetrated Phl – AFP

    Security officials yesterday maintained that the Islamic State of Iraq and Syria (ISIS) has not penetrated the Philippines following an expert’s warning that the group poses a threat to the country. Abu Sayyaf, BIFF (Bangsamoro Islamic Freedom Fighters), private armed groups to our knowledge are the people making problems down south,” Armed Forces chief Gen. Gregorio Catapang Jr. said. The BIFF and the Abu Sayyaf have pledged allegiance to the ISIS but it remains uncertain whether they are …

  • Cerbo named national police intel chief
    Cerbo named national police intel chief

    Philippine National Police officer-in-charge Deputy Director General Leonardo Espina yesterday ordered the appointment of PNP spokesman Chief Superintendent Generoso Cerbo Jr. as chief of the Directorate for Intelligence. …

  • Pump prices up anew
    Pump prices up anew

    Oil companies announced yesterday another round of price hikes with independent oil firms among the first to issue their respective announcements. PTT Philippines, the local subsidiary of Thailand’s biggest oil firm, and Phoenix Petroleum Philippines, another independent oil company, were among the first to issue their respective advisories. Seaoil Philippines also issued its announcement. …

  • PNP to ease rules on gun permit processing
    PNP to ease rules on gun permit processing

    The Philippine National Police will simplify requirements for getting a firearm’s permit under the new gun control law, PNP officer-in-charge Deputy Director General Leonardo Espina said yesterday. Espina said they are working to simplify the process to secure a license to own and possess firearms (LTOPF) amid complaints of excessive requirements from gun holders. Espina directed the Firearms and Explosives Office (FEO) to make it easier for legitimate gun owners to comply with the …

  • Mercy for Mary Jane: Pacman joins appeals
    Mercy for Mary Jane: Pacman joins appeals

    World boxing superstar Manny Pacquiao took time out yesterday from final preparations for his $400-million megafight with Floyd Mayweather Jr. to plead for the life of a Filipina on death row in Indonesia. Pacquiao, a national hero in the Philippines, added his voice to a chorus of global opposition led by United Nations Secretary General Ban Ki-moon to the executions of a group of foreign drug convicts, including compatriot Mary Jane Veloso. The eight-division world champion, who will face …

  • Phl condoles as Nepal death toll hits 3,700
    Phl condoles as Nepal death toll hits 3,700

    Foreign rescue teams equipped with heavy cutting gear and relief supplies were landing round the clock at Nepal’s only international airport on the outskirts of Kathmandu, which has been devastated by Saturday’s 7.8-magnitude quake. “We need more helicopters for our rescue operations in rural areas,” said Nepal Home Affairs spokesman Laxmi Prasad Dhakal. In a statement issued yesterday, Aquino said a team from the Philippine embassy in New Delhi, India would travel to Nepal to meet the needs …


Should Aquino be held accountable over the Mamasapano operations?

Poll Choice Options