OECD comes out in support of Osborne’s failing policies, against the advice of everyone else

If what the Secretary General of the OECD says is true, then the country is in big trouble if the chancellor and the PM are 'intent on staying on course'.

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Secretary general of the OECD, Angel Gurria, said the chancellor’s unpopular economic measures are “sowing the seeds of what will be the elements for recovery”, in direct conflict with advice from the IMF and elsewhere.

angel-gurriaGuerria told Radio 4’s Today programme today:

I would say to the chancellor ‘Stay the course’…

“I would say to the chancellor that the cost of wavering or looking like you are wavering or looking like you are weakening your resolve today because of what is happening in the markets – because of Spain and Italy and Greece and everything else – is very high indeed.

“Perhaps the flexibility that under normal circumstances one could show – a little bit of weakening and maybe extending the periods for the goals and things like that – today could be misunderstood.

I think we have to give very strong signals here, and the chancellor, the prime minister and the deputy prime minister are all really quite intent in staying on course and staying on message.

“This is very important, this is why the UK adjustment programme cleared the markets, this is why you have very low borrowing costs, this is why I think you should persevere.

“You are now sowing the seeds of what will be the elements for recovery. You have to have credible public finances before you start moving on growth.”

The International Monetary Fund (IMF) have warned the UK government time and time again that current economic policies could cause long-term damage to the economy. Here are some examples:

“Looking ahead, the economy is expected to grow modestly, but with current policy settings the pace will be insufficient to absorb significant slack in the economy, raising the risk of a permanent loss of productive capacity.”

IMF report, July 2012

“If activity were to undershoot current expectations and risk a period of stagnation or contraction, countries that face historically low yields (for example, Germany and the United Kingdom) should also consider delaying some of their planned consolidation.”

– IMF Regional Economic Outlook, October 2011, (page 14, pdf)


See also:

Latest GDP numbers mean Britain’s economy has shrunk since general election 25 Jul 2012

Bad news for Osborne, as polls show majority of people want a new chancellor 23 Jul 2012

The IMF warns UK economic policy must change or face permanent damage 19 Jul 2012

IMF downgrades growth forecast AGAIN as Balls warns of “heavy long term price” of failure 16 Jul 2012


“Fiscal easing and further use of the government’s balance sheet should be considered if downside risks materialize and the recovery fails to take off. In particular, if growth does not build momentum and is significantly below forecasts even after substantial additional monetary stimulus and further credit easing measures, planned fiscal adjustment would need to be reconsidered

“Fiscal easing measures in such a scenario should focus on temporary tax cuts and greater infrastructure spending.”

– IMF Article IV consultation, May 22nd 2012

“Policies to bolster demand should help close the output gap faster. It needs to be recognized that policy options in this regard come with risks, including uncertainty about their effectiveness. However, these risks need to be weighed against the risk of weak demand that leads to persistently slow growth and high unemployment that become entrenched in decisions made by consumers and investors.”

– IMF Article IV consultation, May 22nd 2012

Growth is necessary for fiscal credibility – after all, who will believe that commitments to cut spending can survive a lengthy stagnation with prolonged high unemployment and social dissatisfaction?”

– Lagarde, speech, Jackson Hole, August 27th 2011

If what Gurria says is true, then the country is in big trouble if the chancellor and the PM are ‘intent on staying on course’. Current policies have so far been responsible for the longest double-dip recession since world war two and heavily criticised by the IMF, so why won’t the government admit they are wrong?


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