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[ZURICH] Countries should redouble their efforts on structural reforms to enhance labor market participation because the cost of stalling outweighs the current social impact, the Organization for Economic Cooperation and Development said.
In the majority of member countries, the pace of structural reforms has slowed over the past two years and "does not augur well," the Paris-based body said in the 2015 edition of its "Going for Growth" report, published to coincide with the Group of 20 finance chiefs in Istanbul. It labeled the slowdown in reforms, which in turn depresses potential growth, a "vicious circle."
Officials including European Central Bank President Mario Draghi have urged governments from Paris to Rome to complement monetary policy with measures aimed at overhauling economies and bolstering investment. So far, the response to these calls has been muted, with national foot-dragging on reforms and an infrastructure plan from European Commission President Jean- Claude Juncker not delivering spending until well into this year.
"Given the need in many countries to tackle rising inequalities and hardship, governments should give priority to pro-growth policy packages that help promote equity and inclusiveness," said the OECD, which advises its 34 member governments on economic policy. "It is particularly important to lift the earnings potential of the low-skilled and make it easier for women to join the labor force." In Greece, persistently high joblessness has contributed to a backlash against budget cuts and was one of the key factors behind the victory of the Syriza party in elections last month. Spain and Italy are also seeing a rise in anti-austerity sentiment.
According to the OECD, reform efforts in core euro-area countries are "relatively weak," and declined in Greece, Ireland, Portugal and Spain, all countries that had to take external financial aid in recent years. At the same time the pace of overhaul in Japan picked up.