Developed world better prepared for crisis: OECD

By Marja Novak

BRDO PRI KRANJU, Slovenia (BestGrowthStock) – Developed economies, including Portugal and Spain, are better prepared to deal with market contagion than a year ago but countries need to introduce structural reforms to boost growth, the OECD said on Monday.

“Things are difficult, markets act irrationally and they are contagious very fast,” Angel Gurria, Secretary-General of the Organization for Economic Cooperation and Development told reporters on the sidelines of a conference in Slovenia.

“But at the same time I think that we are better prepared and stronger and the antidotes we have are better,” he said a day after EU finance ministers endorsed an 85-billion-euro ($115 billion) loan package for Ireland.

Portugal is widely seen in markets as the next euro zone country at risk of requiring a bailout, followed possibly by Spain.

Gurria said Spain and Portugal had shown real political will and had passed a number of measures to deal with the crisis, including introducing tax reform and increasing labor flexibility and are now “better prepared to face whatever comes.”

The European Financial Stability Facility (EFSF), established earlier this year to help euro zone member states that could not finance themselves in the market, provided a safety net for euro zone members that had not been available before, he said.

“The awareness about the fiscal position of countries is greater than ever, the willingness to execute true fiscal reforms is much higher … and in case of need there is a safety net,” Gurria said.

“That safety net reduces the risks, limits the damage … of volatility, nervousness and fear.”

He also praised the role of the European Central Bank (ECB) in stabilizing the financial markets, saying the ECB “has been a very important, discreet source of stability.”

But he warned that OECD countries were facing a medium-term period of mediocre growth, high unemployment, high deficits and high accumulated debt and urged member countries to undertake structural reforms to speed growth.

The OECD, which comprises 33 mainly rich countries, aims to support sustainable economic growth and raise living standards in member countries and contribute to global economic development.

(Reporting by Marja Novak; Editing by Zoran Radosavljevic and Susan Fenton)

Developed world better prepared for crisis: OECD