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“The global economy is strengthening gradually, but the upturn remains weak and uneven”, said OECD Secretary-General Angel Gurría. “Supportive monetary policies, improving financial market conditions and a gradual restoration of confidence are at the root of the recovery. Also, the fiscal adjustment of the last few years is beginning to pay off. Several countries are close to stabilising their government debt-to-GDP ratios and ensuring a gradual decline in indebtedness over the longer term”, Mr Gurría said.
Downside risks to the outlook have narrowed, but are still large. Adverse interactions between weakly capitalised banks, government finances and the real economy remain a significant risk in the euro area. Fiscal concerns remain in the United States and Japan in the absence of credible medium-term consolidation plans. Future withdrawal of exceptional monetary policy measures could lead to instability in financial markets. There is a risk that potential growth rates may be lower than currently estimated following the global economic crisis.
According to the OECD Economic Outlook, government policy should focus on measures to enhance growth, make public finances more sustainable and growth-friendly and implement structural reforms to boost investment and create jobs, the OECD said. In Europe, bolder measures to solve the financial and banking crisis once and for all are needed to ensure a faster, stronger and more sustainable recovery. Construction of a full-fledged banking union needs to be speeded up.