Eurozone Remains the Biggest Threat for Global Economy

In its latest report, the OECD (Organization for Economic Cooperation and Development) recommends that austerity measures in Eurozone should loosen up, adding that member-states should not abandon structural reforms. OECD points out that one the major variables that have deepened recession in Eurozone concerns the constant spending cuts, including those desitned to social welfare.

In global scale, OECD predicts 1,4% average growth for its 34 member-states, almost 1% lower than the previous prediction for 2013 six months earlier. In the following two years it is predicted that global economy will face additional barriers towards development and growth, whereas there is a growing concern that market shrinking will be even deeper. Regarding Eurozone, OECD stresses out that the monetary union would be possibly exposed to further threats stemming from the effect of recession in the society.

Chief economists from the organization press for the rebying of public bonds of overdebted states from the European Central Bank (ECB) and the decrease of interest rates the ECB loans to third parties. Similar are the indications for the US and the Japanese economy which are both strained by recession and indebtedness.

One of the most interesting predictions of the OECD report deals with deflation trends in Eurozone. Especially in overdebted states, despite all pressures over wages and pensions, inflation rates remain irrelevantly high when comparing with unemployment and consumption rates. As a matter of fact, inflation rates remain steady, but with increased proportion. This anomaly is mainly owned to the uncontrolled market irregulation that especially during periods of recession should be retained and corresponded to the general downward pressures of consumption and production rates.

Needless to say that OECD reflects some the general guidelines of the last Eurogroup and it is therefore subjected to the relevant criticism. Bottomline, it is positive that OECD refers to inflation’s irrelevant trend as one the major side-effects of recession. But after all, what we see is a slow observation of the facts and a slower action to address some of the major macroeconomic anomalies of the global economic crisis. More action and less observation is needed, especially in Eurozone.

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