News Column

Eurozone Being Left Behind in Recovery

May 29, 2013

The results of different policy responses to the global economic crisis are starting to show, with the United States reaping the rewards of its financial sector reforms and monetary easing and the eurozone continuing to lag behind, the OECD said Wednesday.

In its latest global economic outlook, the Paris-based club of developed economies sounded a cautiously optimistic note.

"The global economy is moving forward," OECD chief economist Pier Carlo Padoan wrote, but the recovery is "still disappointing" and taking place "at multiple speeds."

In the fast lane is the United States, which is forecast to continue pulling ahead this year, with GDP growth of 1.9 per cent, accelerating to 2.8 per cent in 2014.

In the slow lane is the 17-country eurozone, where the OECD forecast a GDP contraction of 0.6 per cent this year before a return to growth of 1.1 per cent in 2014.

The US economy "has undergone significant adjustment, which is beginning to bear fruit. The combination of a repaired financial system and a revival in confidence is driving growth," Padoan wrote.

Japan, which is battling high debt and persistent deflation, also drew praise for devaluing the yen and promising "decisive" fiscal consolidation. The Japanese economy was forecast to grow 1.6 per cent in 2013, slowing to 1.4 per cent in 2014.

The eurozone, by contrast, still presents "negative risks."

Unemployment was identified as "the most pressing challenge" for eurozone governments. The OECD expects the jobless rate in the single currency area to rise to continue rising into 2014.

The OECD called for a "more supportive" macroeconomic policy to support the austerity measures and structural reforms undertaken by several eurozone members.

The European Central Bank should consider further bond buying, the report said. The eurozone was also advised to speed up progress towards its proposed banking union, which was "critical to reduce negative feedback loops between sovereigns and banks."

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Source: Copyright 2013 dpa Deutsche Presse-Agentur GmbH. Distributed by MCT Information Services

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