Remarks by Angel Gurría, OECD Secretary-General
Strasbourg, 30 September 2009
Mr. President, Ladies and Gentlemen:
It is once again a great honour for me to address this Parliamentary Assembly. In these challenging economic times, our communication with the representatives of the people becomes strategic. Thank you for the warm welcome.
Mr. Gurría, 30 September 2009, Council of Europe
We appreciate very much the excellent job carried out by Ms. Anna Lilliehöök, the Rapporteur, who has risen to this challenge for the second consecutive year.
I want to share with you very briefly our view on the current global economic situation, before I proceed to report on some of our main lines of work during this challenging period.
When I last addressed this Assembly, one year ago, the world was heading into a tempest in unchartered waters. Thereafter, what started as a financial crisis in some OECD countries turned into a major global economic crisis.
Governments reacted decisively, with a fiscal boost on a massive scale, and central banks around the world made unprecedented efforts to boost liquidity and stabilise financial markets.
I am pleased to report that these efforts have started to bear fruit. The global economy seems to be stabilising. Confidence is slowly being restablished in financial markets. The strength of recession is moderating in OECD countries, while the major emerging economies are gradually recovering their economic dynamism.
These are all good news. But this doesn’t mean that the crisis is over. The world economy is still expected to contract this year. In our latest Interim Economic Assessment, we estimate that the G7 countries will contract by around 3.7% in average. And we are forecasting a weak recovery.
In fact, we are still facing some strong head winds. Bank lending is still well below pre-crisis levels. The same goes for trade and investment flows. Balance sheets need to be repaired and public sector budgets have deteriorated sharply.
More importantly, the social implications of the crisis have not yet been fully felt. 15 million people lost their jobs in the OECD area since 2007 and unemployment is still growing. Unfortunately it may get worse before it gets better. In the OECD area as a whole, unemployment could reach 10% by the end of 2010. That would translate into nearly 57 million unemployed; many of them youngsters. The situation in some developing countries is even worse, especially since workers there don’t benefit from well developed social safety nets.
And as employment falls, poverty increases. The World Bank estimates that the number of people living on less than 1.25 dollars a day will have increased by nearly 90 million by the end of 2010.
But these sober words don’t mean that policy makers are powerless. We can and must reactivate economic growth and employment as soon as possible. It is a political, economic and moral imperative. And we must plan carefully and coordinate our recovery strategies, to make sure that this kind of crisis will never happen again.
The OECD has been working to identify the policy options and the most urgent challenges. We have been helping countries to build timely and effective responses that ensure that short-term action also has a positive long-term impact.
To help countries move in this direction, we have put together the OECD Strategic Response to the Financial and Economic Crisis. This is designed to help policy makers use the crisis as an opportunity to build a stronger, cleaner and fairer global economy.
To build a stronger global economy, we have produced analysis and policy tools to deal with what some call “the dark side of globalisation”. In fact, we need nothing short of a complete overhaul of the rules of the game governing the world economy. We cannot go back to business as usual. At the OECD, we are working on areas like corporate governance, competition, bribery, financial education, pensions, freedom of investment, sovereign wealth funds or fiscal transparency.
Our recent achievement in fighting tax havens, in close collaboration with the G20, was a major contribution to build a more reliable and equitable financial system. With the Council of Europe, we recently decided to update our joint Convention on Mutual Administrative Assistance, and to broaden its participation to include many other countries. This should have an important impact in enhancing international tax cooperation.
We have also multiplied our actions to help governments align their fiscal stimulus packages with long term structural challenges. Fiscal sustainability has been one of our main concerns.
In their efforts to rescue their financial institutions and restart their economies governments are accumulating large budget deficits. The fiscal position in most OECD countries has deteriorated rapidly, with fiscal deficits reaching an average 8 to 9 per cent of GDP in 2010. It is thus crucial that governments develop now a concrete, credible and comprehensive consolidation plan to put public finances onto a more sustainable footing.
Another growing priority in our agenda throughout the past year has been the environment.
Our effort to help countries to build a cleaner global economy has become central. The crisis is giving us a unique opportunity to generate a new type of economic growth, a “green growth”. We badly need it, because our current production and consumption patterns are destroying our only planet at an accelerating pace.
Climate change is the greatest collective challenge that we have ever faced. The world needs a significant reduction in greenhouse gas (GHG) emissions. If we don’t change our behaviour, global emissions will rise by about 70% between now and 2050, and they will keep growing thereafter. World temperatures could rise between 4 and 6°C, by 2100. The environmental, economic and human consequences would be catastrophic.
To help countries strike a deal for the coming COP15 Climate Change Summit of Copenhagen, we have been working on the economics of climate change, explaining the economic viability of solutions like cap-and-trade systems, carbon taxes and the elimination of subsidies to fossil fuels consumption. The G20 decision to phase out these subsidies can be seen as another joint achievement.
Conscious of the urgency of action on the environment, our Ministers gave us a strong mandate to start working on a new “Green Growth Strategy”. Its aim is to help countries adopt the right incentives and set the right frameworks to encourage green investments for a green recovery. We need to move fast. “In skating over thin ice, our safety is in our speed”, as Ralph Waldo Emerson used to say.
Last but not least, we have been working to help countries build a fairer global economy. This has also been one of our main priorities. In advanced countries, the main challenge is to prevent that the tens of millions of unemployed, especially the youngest amonst them, cast a long shadow on our recoveries.
Over the past two days, Employment Ministers have gathered at the OECD to discuss the bold measures necessary to tackle high and persistent unemployment and reduce its social and economic costs. It was a crucial meeting. Ministers reached important agreements and common lines of action. They stressed, for example, the need of quick policy interventions to scale up resources for effective active labour market programmes, to enhance skills and promote lifelong learning systems, to help youth get a firm foothold in the labour market while enhancing their skills to promote their career prospects, and to promote the participation of older workers and those with disabilities. These and many other policy targets have provided us with a new firm mandate to help countries tackle this paramount challenge through a Reassessed Jobs Strategy.
And we are going to pursue this Strategy in the most inclusive way. Massive job losses in developing countries threaten global stability and are therefore a shared responsibility. As we stressed in the G20 Communiqué, “over four billion people remain undereducated, ill-equipped with capital and technology, and insufficiently integrated into the global economy.” We need to change this. One of the biggest challenges of this era is social and economic convergence.
This crisis has been hitting poor countries with particular strength. That is why in October 2008 we issued a call to the world’s main aid donor countries to stand by their development pledges despite the economic slowdown.
Although development assistance reached record levels in 2008, donors are still falling short on their Gleneagles’ commitments, especially in relation to the growing needs in the poorest countries.
We also continue to work on other key areas related to development policies, like enhancing aid effectiveness, integrating adaptation to climate change into development cooperation and measuring aid for trade. This is meant to drive policy improvements to make globalisation work for all. We will not succeed if we act in isolation.
Mr. President, Ladies and Gentlemen:
The OECD will continue to work on these and many other aspects of the economic crisis that I have not had time to mention here. We know that our biggest challenges lie ahead.
At the G20 Summit in Pittsburgh last week, I had the opportunity to stress the need for a new balance between urgency and long term, outlining for the world’s leaders how the OECD can contribute to the Framework for Strong, Sustainable and Balanced Growth.
But our success is measured by impact, and for that we depend on you. As parliamentarians you not only help shape the economies of your own countries, but create the ripple effects that define the future of the world economy. You are the elected decision makers who implement the courageous and timely reforms that our world so urgently needs. You know you can count on us. Only together we will succeed.
Thank you very much.