Despite the “important accident” – not distraction – of Brexit, the old issues that the European Union faces have not gone away, Angel Gurria, Secretary-General of the Organization of Economic Co-operation and Development (OECD), told CNBC Friday.
Speaking at the G20 Finance Ministers and Central Bank Governors Meeting in Baden Baden, Germany, Gurria explained that while he “wouldn’t call (Brexit) a distraction,” looming negotiations in which the United Kingdom’s future outside of the 28 nation bloc will be decided were “taking up a lot more energy and a lot more focus than one would want.”
Warning against a blinkered focus on Brexit, Gurria said that, “the old issues: the debt, skills, productivity, regulation, competition, education, the health issues – that hasn’t gone away.” He acknowledged the EU’s efforts at introspection and affecting change, noting that “Europe has been looking at itself hard now for 8 years, 9 years,” but quipped that “you can accuse Europeans of being many things – except fast.”
Gurria addressed the need perceived by some for a baton change between monetary and fiscal policy. Positive economic growth in Europe should not result in complacency Gurria argued, saying that the bloc “needs to move forward and that means structural change,” adding that sound economic management was “no longer just a question of keeping interest rates up.”
He added that central banks deserve credit for successful work up until now, saying that “we should build a statue in their honor because they have been heroes.” But now was the time for political reform, with “serious government led decisions, proposals, legislation, policies et cetera that no longer depend on central banks and the interest rates.”
When reflecting on the European Central Bank’s quantitative easing program and low bond yields in the European area, Gurria acknowledged that “everywhere you have a fatigue for reform … that’s very serious.”
Gurria also discussed the “vibrant debate” about protectionism in the United States, spurred on by U.S. President Donald Trump’s campaign promises. Gurria commented that the U.S., which is “practically at full employment,” would address its fiscal, current account and trade deficits by understanding that “the question of productivity becomes crucial to maintain the growth going forward.”