The Organization for Economic Cooperation and Development upgraded its outlook for worldwide economic growth. The agency said “Gross domestic product (GDP) across OECD countries is projected to rise by 2.7% this year and by 2.8% in 2011. These are upward revisions from the previous, November 2009, forecasts of OECD-wide GDP growth of 1.9% in 2010 and 2.5% in 2011.”
Beneath the headline, there is more bad news for Europe. The OECD expected growth in the Eurozone to be only 1.2% this year and 1.8% next. This contrasts with a predicted 3.2% GDP growth of 3.2% in the US for both years.The unemployment picture is about the same Euro are joblessness is expected to be 10.1% in the region both years, with Spain as a major drag on the numbers. Unemployment in the country is 20%. US unemployment is expected to be 9.7% this year and 8.9% in 2011.
The agency acknowledges that spending cuts in nations meant to curtail deficits should be in the areas least likely to harm growth. That goal is nearly impossible. Tax increases and cuts in wages effect such broad parts of any economy that they have a significant chance of being regressive. It is also difficult for EU nations to improve competitiveness against the US and China if the public stimulus projects in Europe are eliminated, leaving economies to recover from the recession on their own.
The last key observation of the report states the obvious, but offers no solutions:
“Instability in sovereign debt markets poses another serious risk. It has highlighted the need for the euro area to strengthen its institutional and operational architecture. Bolder measures need to be taken to ensure fiscal discipline.”
That is discipline in the face of major social unrest and resistance often from minority political parties. It also involves substantial revisions of financial regulations in a region where nations rarely agree on anything important.
“If wishes were horses, all the beggars would ride.”
Douglas A. McIntyre
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