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2014-07-09
R.I.P. William 'Bill' Herbert Kelder - Intellpuke

2013-11-28
Gamers Donate 37,500 Pounds Of Food To Needy

2013-09-30
Statement From The Whitehouse Regarding The Government Shutdown

2013-09-29
An Open Response To 'Organizing for Action'

2013-08-26
Bayou Corne: The Biggest Ongoing Disaster In The U.S. You Have Not Heard Of

2013-04-21
Boston Mayor Hopes Feds 'Throw the Book' at Marathon Bombing Suspect

2013-04-19
Boston Police Closing In On Suspects

2013-04-15
2 Explosions At Boston Marathon. 2 Dead, Many Injured.

2013-01-03
The Press vs Citizens Rights and Privacy - Act 3

2012-12-30
CBS News - Year In Review 2012

Nature.com - 366 Days: 2012 In Review

The Guardian - 2012 In Review: An Interactive Guide To The Year That Was

TruTV - The Biggest Conspiracy Theories of 2012

Colbert Nation: 2012: A Look Back

FIP Year In Review(s?)

2012-12-25
Happy Holidays

2012-12-21
Welcome To A New Era!

2012-12-16
An Open Letter To United Health Care, Medcom, And The Medical Insurance Industry In General

2012-11-17
Whitehouse Petition To Remove "Under God" and "In God" From Currency And The Pledge.

2012-11-15
December 21, 2012

2012-11-11
If Hillary Clinton Ran For President, She Would Probably Be The Best-prepared Candidate In American History

2012-11-10
CIA Director David Petraeus Resigns After FBI Investigation Uncovers Affair With High-Profile Journalist

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2012-11-07
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2012-11-06
Live Election Results

2012-09-30
FIP In Hiatus

2012-09-18
U.S.-Afghan Military Operations Suspended After Attacks

Iran Nuclear Chief Says IAEA Might Be Infiltrated By 'Terrorists And Saboteurs'

Romney Stands By Gaffe

2012-09-17
President Obama Says China Trade Practices Harm American Auto Parts Workers


OECD: Strict Austerity Risks Derailing Economic Recovery
2012-05-22 16:35:02 (134 weeks ago)
Posted By: Intellpuke
Europe's leaders meet on Wednesday for crisis talks to rescue the euro amid a warning from the west's leading economic thinktank that persisting with strict austerity programs risks a vicious circle that could derail the tentative recovery in the global economy.

Shares rallied on hopes that the summit in Brussels, Belgium, will find a solution to the debt crisis by backing proposals from the new French president François Hollande that will boost growth and create jobs.

Yet tensions remain between Paris and Berlin, where German Chancellor Angela Merkel's government maintained its strong opposition to the creation of common euro bonds, which would cut the borrowing costs of the heavily indebted countries facing intense financial market pressure.

In London, the FTSE 100 rose by 98 points, reversing part of last week's sharp fall, to close at 5403 points, a rise of almost 2% on the day. German, French, Spanish and Italian bourses also recorded hefty gains as fears receded of an early departure of Greece from the single currency. In its half-yearly update on the global economy (read the OECD report in full here: www.oecd.org/document/16/0,3746,en_21571361_44315115_50405584_1_1_1_1,00.html ), the Paris-based Organization for Economic Co-operation and Development (OECD) said the 17-nation single currency area was on course to contract by 0.1% this year – with deep contraction in the countries of southern Europe – but said a worsening of the debt crisis could result in output falling by as much as 2%. The OECD, which has 34 rich-country members, said it expected Greece to contract by 5.3%, Portugal by 3.2%, Spain by 1.6% and Italy by 0.9%.

While penciling in a return to modest 0.9% growth in 2013, the OECD's chief economist, Pier Carlo Padoan, said: "The risk is increasing of a vicious circle, involving high and rising sovereign indebtedness, weak banking systems, excessive fiscal consolidation and lower growth." Padoan urged Europe's leaders to adopt a "growth compact", which would help countries tackle their budget deficits through faster expansion.

(story continues below)




With developing countries such as China still growing strongly, the thinktank said global growth this year would be 3.4%, down from 3.6% in 2011, before rising to 4.2% in 2013. Growth among OECD members would be held back by Europe and would ease from 1.8% to 1.6% in 2012 before recovering to 2.2% in 2013. Of the big rich nations, the U.S. and Japan would grow most strongly, while Britain is expected to grow by just 0.5% this year, accelerating to 1.9% in 2013.

"We see a slow rebound of growth in the United States driven mostly by private demand, some pickup in Japan and moderate to strong growth in emerging economies," said Padoan.

"We also see flat growth in the euro area which hides important differences, with northern countries growing and southern countries in recession," he said. Padoan expressed concern about a debt default in Greece and the shaky condition of Spain's banks, but said the emergency action by the European Central Bank, including a €1 trillion (£808 billion) liquidity injection, had so far prevented the debt crisis from spiraling out of control.

"If the situation gets worse, there are ways to enhance the firewall capacity which could include a stronger intervention or role of the ECB," said Padoan.

In contrast to the euro zone, the United States was expected to continue to benefit from easy credit conditions and ultra-loose monetary policy, with the world's biggest economy forecast to grow 2.4% this year and 2.6% in 2013.

Japan's 2% growth this year would be boosted by a construction boom following the tsunami in 2011, while China would expand by 8.2% in 2012 and 9.3% in 2013.

The OECD predicted that the U.K. would recover this year from its double-dip recession over the winter. The thinktank maintained its previous 0.5% growth forecast for 2012 while raising its 2013 prediction a notch to 1.9%.

"Fiscal consolidation is a drag on growth," the OECD said. "However … fiscal policy remains heavily constrained. The ambitious government plan to restore fiscal sustainability remains on track and appropriate despite disappointing economic growth."

David Cameron's coalition government has lost popularity and come under pressure to change course as austerity measures have hit demand, leading to the U.K.'s second recession in four years, but the OECD said the downturn would be temporary and that after weak growth in the first half of 2012, the economy would then start to pick up speed.

Intellpuke: You can read this article by Guardian Economics Editor Larry Elliott in context here: www.guardian.co.uk/business/2012/may/22/europe-crisis-drag-on-global-economy


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