OECD Issues Warnings about Reckless Spending and a ‘Brexit’

The Organization for Economic Cooperation and Development (OECD) warned countries trying to spend their way out of crisis that they risk becoming stuck in perpetual economic malaise. The OECD said central banks were running out of room to boost economies, and fears this could become particularly problematic in the event of a sharp financial slowdown.

Angel Gurria, the Secretary General of the OECD said, “Countries that say: I’ll spend my way out of this third slump. I say: no you won’t, because you’ve already done that, and you ran out of space.”

The Organization for Economic Cooperation and Development (OECD) warned countries trying to spend their way out of crisis that they risk becoming stuck in perpetual economic malaise. The OECD said central banks were running out of room to boost economies, and fears this could become particularly problematic in the event of a sharp financial slowdown.

Angel Gurria, the Secretary General of the OECD said, “Countries that say: I’ll spend my way out of this third slump. I say: no you won’t, because you’ve already done that, and you ran out of space.”

He went on to note that structural reforms and greater international cooperation would be critical to avoiding further problems in a world running short on areas in which to grow.

According to the Telegraph, Gurria also commented on nations trying to improve their credit ratings. He suggested that countries trying to reduce their deficits and debts avoid inflating their way out of trouble.

Gurria has indicated an ongoing frustration with the lack of progress in nations making structural reforms. While recognizing that such reforms take time, he strongly believes they are the only way for the world to improve the overall health of the global economy. “Germany modified its labor laws 12 years ago, and it’s reaping the benefits brilliantly and gallantly because of much better performance during the crisis. Spain did it three years ago and they are reaping the benefits now. Italy did it last month, and it will take a couple of years.”

Gurria also warned about the dangers of a British exit from the European Union. “I would do anything in my power to avoid ‘Brexit’ because I think that it’s a lose-lose proposition … Trying to calculate who would lose more is a fallacy. Britain would be weaker and Europe would be weaker.”

British Prime Minister David Cameron has set out a four-point list of demands from the EU, including a new system to bring power back to the UK, dubbed the “red card” system. While other nations believe many of Britain’s concerns are legitimate, they also feel some are simply too far reaching. Michel Sapin, the French finance minister, described Britain’s demanded reforms of free movement laws as a “red line,” and unlikely to cause a change of EU treaty laws in the next few years.