US and EU unemployment will reach 10 percent this year as the global economic slump causes the economies of the 30-member Organization for Economic Cooperation and Development (OECD) to contract, OECD Secretary-General Angel Gurria said.
“This is unprecedented; we have not seen this in many decades,” Gurria said in a TV interview in Rome.
The OECD will release its latest forecasts today and will predict a contraction of 4.2 percent to 4.3 percent for the world’s most industrialized countries, Gurria said. That compares with its previous forecast in November for a 0.3 percent contraction.
The deepening global recession means that countries need to do more to lift their economies out of the economic slump, he said.
“A modest stimulus package is not enough, because the downturn, the recession was a lot deeper and lending a lot harder than we thought; so we need more to get out of the recession,” he said.
Leaders of the G20 countries will meet in London on Thursday to try to forge a common response to the crisis. US calls for European countries to spend more on stimulus plans to try to limit the effects of the slowdown have been met with some resistance by government’s that have spent years trying to tame their budget deficits.
“Some countries, like the US, are pushing hard, because they are making very big efforts; the Chinese are making very big efforts,” Gurria said. “They can’t carry everybody on their shoulders; they need everybody else to do this, and the rest of the world has different capacities to have this fiscal expansion.”
Gurria said that the G20 would also need to consider stepped-up regulation of financial markets and adopt other measures to restore confidence in and among the world’s banks to get lending going again.
“This is the real objective,” he said. “So you have to give confidence, you have to give guarantees, you have to separate bad assets and good assets, you have to recapitalize the banks. All that, in a context of a new regulatory world, in order for the banks to lend again.”
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