WRAPUP 3-OECD, Canada urge clear plans for cutting deficits

* OECD chief says market must understand fiscal plans

* ECB’s Noyer says Greek crisis illustrates risks of delay

* Canada concerned about EU’s economic uncertainty
(Adds comments from Bernanke)

By Jonathan Spicer and Rachelle Younglai

MONTREAL, June 7 (BestGrowthStock) – Countries with big deficits
must offer clear plans on how they will balance their budgets
to maintain investor confidence and avoid problems seen in
Europe, top economic policymakers said on Monday.

The warnings came after finance ministers and central
bankers meeting in South Korea reached an uneasy compromise on
Saturday on the speed at which budget cuts should be made to
calm global financial markets rattled by the spreading debt
crisis in Europe. [ID:nTOE65400M] [ID:nSGE64R00R]

“Make sure that you give signals to the markets about
fiscal consolidation,” Angel Gurria, head of the Organisation
for Economic Cooperation and Development (OECD), told a
conference in Montreal on Monday.

Gurria said it was imperative that countries announce their
fiscal plans to avoid what happened with Greece’s debt crisis,
when uncertainty spurred investors to sell the country’s bonds
and drive its borrowing costs higher.

“Do we have to start now? No. Do we have to announce now?
Yes,” said Gurria, secretary-general of the OECD, a group of 31
countries that promotes democratic government and market-based

Financial markets fear that other countries could suffer
the same fate as Greece, which has already taken drastic
measures to bring its fiscal house in order.

Greece has pledged to cut its public deficit by almost a
third to 8.7 percent of gross domestic product this year.
Germany also has announced plans to pursue savings in an effort
to shore up confidence in the finances of the 16 nations that
use the euro.

Policymakers from Canada, whose banks weathered the 2008
financial crisis without any government support, expressed
concern about the continuing economic uncertainty in Europe.

“We’ve pushed hard for those countries that need to
fiscally consolidate in Europe to get on with it and to
demonstrate their resolve,” Canadian Finance Minister Jim
Flaherty told reporters in Toronto.

“This is important because there is a risk to economic
growth generally if the fiscal consolidation issue is not dealt
with expeditiously and effectively,” Flaherty said.

U.S. Federal Reserve Chairman Ben Bernanke, speaking at an
event in Washington, said the United States also needs to get
its fiscal house in order, but must to do so gradually.

“We need a medium-term plan — an exit strategy if you
like,” Bernanke said. “We (at the Fed) will continue to
advocate strong action on this.”


Hungary rattled investors last week with comments
suggesting the country was close to a Greek-style economic
meltdown. It tried to back off those comments over the weekend.

European Central Bank board member Christian Noyer said
that the recent developments in Greece show the recovery is
fragile even though the short-term economic outlook for the
European Union is favorable. [ID:nN07190822]

The Greek debt crisis illustrates the risks of postponing
deficit control measures, Noyer told the Montreal conference.

Euro zone finance ministers are trying to set up a vehicle
for emergency borrowing that would act as a safety net for
countries that are not able to obtain financing from markets.

Although economic recovery has been fragile in Europe,
structural reforms could allow it to “leave behind the crisis
once and for all,” said Noyer, who also is governor of the Bank
of France.

At the conference in Montreal, Bank of Canada Governor Mark
Carney said he has confidence in the ECB’s actions to contain
the European crisis.

Carney said “regulatory certainty” is needed to get the
global financial sector back on track.

The United States and the European Union are trying to
overhaul their financial regulation systems to safeguard
against future financial crises.

The United States and other countries had proposed imposing
a tax on financial services firms in an effort to make the
firms pay for their own bailouts. But finance ministers from
the world’s top economies on the weekend scrapped plans for
such a tax.

Noyer said that it was more important for banks to have
sufficient capital than to impose a tax on financial
institutions. The danger would be to weaken the strength of
banks’ balance sheets, Noyer said.

Noyer noted that his comments on Monday should not be taken
as indication of policy decisions that will be taken at the
European Central Bank governors’ meeting later this month.

Investing Advice
(Additional reporting by Jen Kwan: Editing by Jeffrey Hodgson,
Peter Galloway and Carol Bishopric)

WRAPUP 3-OECD, Canada urge clear plans for cutting deficits