The Organisation for Economic Co-operation and Development (OECD) has called on the European Central Bank (ECB) to immediately lower eurozone interest rates to get the region's economy back on track.
Presenting its Economic Outlook on Wednesday (24 May) in Paris - a half-yearly health check on the global economy - the organisation noted that overall statistics were bad for Europeans. Prospects differ widely, ranging from "solid in Asia to back on trend in the United States, and weak and uncertain in Europe", OECD chief economist Jean-Philippe Cotis said.
He used the opportunity to call for "immediate" and "significant" cuts of eurozone interest rates to turn the tide. Mr Cotis even questioned the "credibility of the Economic and Monetary Union" and said policies should address thoroughly and promptly the "chronic pattern of weak resilience and diverging activity within Euro land".
While forecasts of GDP growth in the United States hit 3.6 per cent for this year, predictions for the eurozone dived to 1.2 per cent.
The eurozone also comes out bottom on employment - with the jobless rate expected to be 9.0 per cent in 2005, nearly double that of Japan (4.4 per cent) and the US (5.1 per cent). The weak eurozone economy "stems in large part from a stronger euro and higher oil prices", the OECD said. It pointed to countries like Italy and Germany who show a "distinct and recurrent lack of resilience" to outside shocks, while in contrast smaller economies such as Spain and the Nordic countries have "held out well".
The OECD call to cut rates is not making much of an impression on Erkki Liikanen, governor of the Bank of Finland and a member of the ECB's governing council, however.
The former commissioner told the FT that the bank is likley to move rates up instead.
By: N. Peter Kramer
