OECD urges EU to step up emerging economic challenges

13 Jun 16

The European economy must address some major new challenges as well as unresolved problems in order to sustain its gradual recovery, the OECD has said.

In two reports published last week – economic surveys of the and the – the think-tank said that cooperative solutions are needed to common problems, including high unemployment, sluggish investment and weak credit growth.

“Cooperative solutions have enabled Europe to leave the worst of the crisis behind it,” said OECD secretary general Angel Gurría.

“The alternative to collective action is not the status quo, but something worse: the risk Europe will move backwards.

“This would jeopardise what has been achieved to date by the single market and the rest of the EU acquis, decreasing growth and destroying jobs across Europe.”

The OECD argued that the single market needs to be deepened, in particular in terms of labour mobility, which it said can be a key tool in reducing unemployment and boosting productivity.

It also recommends the reduction of regulatory barriers and administrative burdens, especially in the service sector, broad-based reforms in tax structure and R&D expenditure, and the prioritisation of trans-European solutions for fragmented transport and energy networks.

In a speech in Brussels last week, Pierre Moscovici, European commissioner for economic and financial affairs, taxation and customs, underscored the importance of structural reforms to overhaul labour markets, increase innovation, remove barriers to growth and expand the single market.

He said such changes would be essential for continued recovery, and that they should be prioritised.

His comments also lined up with OECD findings on public investment, which the think-tank said has taken deep cuts and needs to be stepped up, alongside spending in states that have fiscal space to boost growth.

The OECD added that national budgetary frameworks also need an upgrade, with national expenditure rules and spending reviews adopted and measures to ensure national independent fiscal institutions have the resources to fulfil their mandate.

The survey predicts that the EU’s GDP will grow by 1.8% this year and 1.9% in 2017, while the euro area will grow by 1.6% and 1.7% respectively.

However, this outlook is subject to a number of risks, most notably a UK exit from the EU, which the OECD said would lead to economic uncertainty and hinder trade and foreign direct investment flows for both the UK and the EU, hurting growth.

Meanwhile, staff from the European Commission concluded a post-bailout visit to Ireland last week. They the recovery in what is now the EU’s fastest growing economy as “remarkable”.

However, the commission’s report cautioned Ireland on the state of its public finances, only a month after removing the country from its excessive deficit mechanism.

Planned increases in public spending could increase the deficit again without higher-than-anticipated revenues and a number of further tax cuts are a cause for concern, the report said. 

  • Emma Rumney

    Emma is a reporter at Cooking Recipes International. She also writes for in the UK.

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