World cannot spend its way out of a slump, warns OECD chief

Angel Gurría says spendthrift countries are leaving themselves exposed to next shock as OECD secretary general warns both sides would lose if Britain left the EU.

   Countries that try to spend their way out of crisis risk becoming stuck in a permanent malaise, according to the head of the Organisation for Economic Co-operation and Development (OECD).

   Angel Gurria said central banks were running out of firepower to boost economies in the event of another sharp slowdown, while governments had limited space to ramp up spending.

   The secretary general said structural reforms and more international co-operation were badly needed in a world of deteriorating growth. “Countries that say: I’ll spend my way out of this third slump. I say: no you won’t, because you’ve already done that, and you ran out of space,” Mr Gurria said on the sidelines of the IMF’s annual meeting in Lima, Peru.

   “Now countries are trying to reduce the deficit and debt because that’s a sign of vulnerability and the rating agencies are breathing down their neck - they’ve already downgraded Brazil and France. “We don’t have room to inflate our way out of this one. So we go back to the same issue: it’s structural, structural, structural.”

   The OECD has been working with countries such as Greece to liberalise product markets, which deal with competitiveness issues and labour laws. Mr Gurria, who has urged countries for years to implement structural reforms, said he was frustrated at the lack of progress: “If you listen to the conversations we have on opening on Sundays you wouldn’t believe it. Or the debates we have about [the] 35 hour [working week]. These are the real issues.

   “The people, the trade unions, they all have a stake and their arguments are strong. But where countries have room is to make structural changes, and central banks can help by continuing to ease.

Πηγή: telegraph.co.uk