AB:This morning the OECD published a gloomy assessment of employment prospects in developed countries ahead of the G20 meeting in Caan later this week. It’s warning that unemployment, and especially long term unemployment will remain high. A few minutes ago I spoke to the Secretary General Angel Gurría and began by asking him if the UK is amongst those countries who should be worried.
 
AG:It includes all those countries where today unemployment is high because for the first time you have a segmented market where a number of countries were below the pre-crisis level of unemployment. The problem is this is a mirror that we’re holding up to the G20 and saying, do you like this that you see in the mirror, and the idea of course is that they say no, we don’t like it, therefore you have to do better. This is the inertial scenario, we have projected 2012, 2013 and this is what we see in the face of no change, inaction. So let’s go and adopt the action plan that is proposed in the G20.
 
AB:What about this big question about government spending now, what some people call Keynesian versus the need to get debt under control, which should take the priority?
 
AG:I don’t think it is a question of black of white, what we have said is some countries ran out of space and out of time and they started their adjustment processes early, because they had to, because the markets were focusing on them and zeroing in on them, and therefore it was appropriate that they do that. What we’re saying is for those countries that still have some room, monetary policy, well, the ECB, for example, we believe they still have some room to reduce interest rates. On the fiscal side, is there still room to come out spending in the short term as long as you have a medium and long term scenario that leads to debt sustainability and a reduction of the accumulated balances of the debt because today they are simply too high. Now, this changes from country to country, what we’re saying is use the space that you have but don’t lose track of the signals that you want to give to the market, that you have a medium term plan.
 
AB:What about Britain, because as you know, there is a very lively argument here which back when this government came into office your deputy actually warned that perhaps the austerity planned by the government was going to be too much and risked choking the economy. Of course, we’re now more than a year into that. Does George Osborne need to slow down, does he need to be finding more money for the stimulus, even if that means that the deficit is paid off more slowly?
 
AG:In many cases, when you have a very large deficit, and that was certainly the case of the UK, you have to give signals that you're no longer choosing or wavering, you give very, very strong signals of the direction which you want to go and which will give confidence and will give power to the country in the markets, and that is exactly what happened, you did that, you were successful, you cleared the markets, the package was credible. Now, after you do that, then the question is, the roll out, the execution, so far the execution has been incredible. The markets never discuss the quality of the rating of the UK. Now, the question of course is always the balance between again the recovery and the fiscal consolidation and I read with great interest today about the so-called plan B.
 
AB:You read plan B, do you think we need plan B in this country now, given where we are?
 
AG:Well, the problem is one tends to put these things in black and white. The question of having even very tight budgets, a recourse to mechanisms that will allow to cover the most vulnerable, to look at public employment services, to perhaps give some stimulus to companies so that they would create jobs etc, or even create facilities, which may or may not have been there in the original project to focus or encourage investment in infrastructure are things that are perfectly legitimate. Now, adjusting programmes and plans is something which happens in the best of families, in many cases it’s wise, in many cases it’s the only way to go. The only question is here that when you are trying to communicate with an unforgiving market and you're trying to give the message of what, well, this particular case was I have a double digit deficit and I'm going to get it down, otherwise this is unsustainable, otherwise we’re going to find increasing costs of public financing, otherwise we may have a rating in danger, and otherwise the financial system etc, etc. You have to be very, very strong and almost say, okay, one message at a time.
 
AB:What we don’t have in this country is any sign of a recovery. Unemployment is still going up, growth is very, very low, of course we’ve got growth figures tomorrow and looking at your charts, it just seems to me that even if we stay on course, we’re talking about what, at least another year of real pain before there is any sign of things picking up in an economy like Britain.
 
AG:Yes, I was going to say that you are unfortunately in rather good company and that also for a large, open economy like Britain, if all its neighbours in the world, trading partners, are losing steam and therefore losing the capacity to buy from Britain, or to travel to Britain or to use the financial services of Britain, clearly Britain is going to have an impact, Britain is not isolated. On top of that you have this situation that you are going through a fiscal adjustment, together with practically every single other large economy in the world. So what you have is a generalised slowdown of the world economy. You may even see in some countries, in the Eurozone in particular, some negative patches, meaning some periods in which you’re going to see some negative growth. That is going to happen before we pick up the growth again. It may be inevitable but again we have to address some of the issues, the short term, the banking issue, the Greece issue, the larger debt issue and then the deficits in the United States, the question of deflation or recuperation in Japan, how they're going to be dealing with their post-tsunami economy, and I hope we will keep Indian and China at a healthy 8% or 9% which will allow them to deal with their overheating pressures and at the same time continue to grow at 8% or 9% for a few years because they will help us pick up later. 
 
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