OECD outlines reforms needed for euro survival

13th December 2010

The OECD's latest Economic Survey of the Euro Area, presented today in Brussels by Pier Carlo Padoan, the OECD's deputy secretary general and chief economist, confirms that a moderate recovery is underway.

But he also says that governments in the Euro zone need to take steps to make sure the economic region is on a "more robust footing" for the future.

Proposals include improved fiscal discipline, better financial regulation and comprehensive labour and product reforms. This, the OECD says, will boost growth and competitiveness and address the "build-up of large economic, fiscal and financial imbalances".

But is it enough? Investors across the UK seem to think otherwise. Finsternis commenting in The Daily Telegraph  says: "Frankenstein's monster is like a dying animal. It is best to put it out of its misery, the sooner the better."

And the newspaper reports that the UK's leading economists have given the Euro a one-in-five chance of surviving altogether.

Counter to the OECD's talk of a modest recovery, the latest Ernst & Young Eurozone forecast seems to suggest that a "severe recession" in the Eurozone is now far more likely. It says the prospects of a severe recession are one-in-10 and it is predicting that GDP in the region will grow 1.4% next year, against 1.7% this year.

Ray Boulger from independent mortgage adviser John Charcol says the big worry now is what effect the crisis in the Eurozone will have on the UK.

He says: "Now that the fundamental flaws in the Euro project have been so prominently exposed, those countries which promoted and joined the Euro experiment for political reasons but ignored the economic realities of life have a major challenge.

"It is difficult to see how the Euro can survive in its current form but all the potential solutions which have been proposed so far look extremely messy.  Most will cause serious short term pain for many of the Eurozone participants and as over half of UK trade is with the Eurozone any negative impact on Eurozone economies will inevitably result in some fall out for the UK.  

Leave a Reply

Your email address will not be published. Required fields are marked *