©Yannis Behrakis/Reuters

The Cyprus crisis is the result of policy mistakes and a failure of collective responsibility, as well as an illustration of what bad policy can do and could do if it’s not corrected. It’s now too late to take the easier steps that could have avoided the problems we’re facing today, but there are alternatives to the myopic, badly conceived plan proposed by the Troika (the committee led by the European Commission with the European Central Bank and the International Monetary Fund that negotiates loans to the states worst affected by the sovereign debt crisis).

Click to enlarge

The Great Recession—the financial, economic and social crisis that started at the end of 2007—has proved to be one of the longest and deepest in half a century, and so it is no wonder that news of a recovery has been greeted with such enthusiasm. But will the recovery be strong enough to help put OECD economies back on a pre-crisis growth path?

Whether you blame poor regulation, sloppy governance, greed or bad luck, banks were frontline culprits in causing the crisis. Governments have been working on reforms to fix the financial sector and improve governance, but a lot more work remains to be done. Some OECD principles can help.

Avoidance and false certainty are common afflictions of economic policymakers. Could this explain why they missed something as big and obvious in hindsight as the 2008 financial crisis? Courage to take on the causes of the crisis is needed now. 

©Reuters/Lucas Jackson

Fixing finance

There are good reasons why the public has lost confidence in banking and finance. Two issues in particular must be addressed before it can be restored– moral hazard and conflict of interest. Reforms should ensure that banks and bankers–not taxpayers–pay the price of failure and are held fully accountable for their actions.


©Norwegian government

Ultimately the economic crisis is about people, says Espen Barth Eide, Norway’s minister of foreign affairs. That is why respecting human rights and adherence to democratic principles are fundamental when addressing the current economic crisis. We are in this together, so we need multilateral solutions more than ever.

This time it's different - Click to enlarge

After five years of crisis, the global economy is weakening again. In this we are not facing a new pattern. Over the recent past, signs of emergence from the crisis have more than once given way to a renewed slowdown or even a double-dip recession in some countries. The risk of a new major contraction cannot be ruled out. A recession is ongoing in the euro area, the US economy is growing but below what was expected earlier this year, and a slowdown has surfaced in many emerging market economies.

The EU’s crisis has as much to do with leadership and solidarity as resolving fiscal and debt problems. It is time to dispense with caricatures and write the next chapter in the EU’s ongoing history. And for that, clear and transparent data will be needed.

©Srdjan Zivulovic/Reuters

The euro area has been at the centre of the global financial storms for two years. Some serious observers have begun to question whether the euro area will survive these currents. The recently published OECD Economic Survey of the Euro Area shows how Europe’s bold experiment in economic integration can be made to work. 

©Reuters/François Lenoir

Poland is not yet a member of the euro area, though is watching the euro situation with close interest. 

©Deutsche Bank

The new euro architecture that is to come into effect from July still suffers from shortcomings, and problem countries have yet to prove that they can survive within the euro says Thomas Mayer. It would be premature to sound the all clear on the euro crisis. 

European leaders should shift their focus from austerity to growth, not least to fight unemployment, says the ETUC, which urges a Social Progress Protocol to be attached to the European treaties. 

The crisis-induced trend towards inward-looking policies poses great dangers for Europe. 

©Yuriko Nakano/Reuters

The global economy took a sharp turn for the worse following the collapse of Lehman Brothers in September 2008, and today it is increasingly apparent that the crisis has entered its second round. This time we are facing a combination of low growth and trouble in the financial sector, just as governments find themselves running out of economic policy options. 

How can the euro crisis unfold? For David McWilliams, Irish economist and best-selling author, the answer is probably a two-speed arrangement between core and periphery. 

Pier Carlo Padoan ©OECD

The history of economic policymaking has been marked by a succession of “paradigms” defining the goals of economic policy and the instruments used to attain them.
OECD Chief Economist Pier Carlo Padoan looks at where we go from here.

Whether or not you believe they have been reformed enough, few institutions have received as much attention during the current economic crisis as banks.

But how much money do they really control and how can their behaviour affect our economies so much?

Financial market failures were a major cause of the economic crisis, but property markets, particularly for housing, have had a leading part to play too. From the subprime debacle in the US to the bursting of unprecedented real estate bubbles in Ireland, Spain and Greece, among others, the overheating and collapse of property markets not only hurt savings and investments, but was felt throughout entire economies, affecting construction, employment, lending, spending and more.

“Growth is turning out to be much slower than we thought three months ago,"  OECD Chief Economist Pier Carlo Padoan said when issuing his organisation's forecast update for major global economies on 8 September. 

Interview with James M. Flaherty, Minister of Finance, Government of Canada

Why do some businesses, organisations, economies and even countries succeed in achieving their objectives while others do not? Important insights are provided if we treat each of these entities as a complex adaptive system, subject to the same processes as biological evolution.

Canada’s labour market was spared some of the more dramatic peaks and troughs of the economic crisis. Why?

Canada is a trading nation. As a geographically large country, rich in natural resources and with a relatively small population, trade was a natural starting point. But Canada has built on this foundation and today boasts a highly skilled and educated work force, a well-developed physical and financial infrastructure, a transparent and predictable regulatory environment, and a high degree of openness to trade and investment.

Building tax administration capacity is needed to help spur development in Africa. A new survey shows that action is being taken, but more work is needed.

How can we all learn from a crisis? Today, we find ourselves in a disappointing, if not altogether unexpected, predicament. The very governments who took bold and decisive action in the period of the financial crisis 2008-09 to bail out banks and keep financial markets alive now find themselves on the receiving end of severe punishment from financial markets. How could this be?

“The government’s top priority is reducing the nation’s deficit and returning Britain to strong and sustainable growth. That means the right economic policies at home and creating the right economic environment abroad.

The recent financial crisis has left a hole in the public finances of many countries. Yet, with the right preparation, governments may have been better placed to fund that gap. This holds lessons for future crisis resolution strategies.

The financial crisis has taken a heavy toll on government finances and taxpayers are still footing the bill. Could private investors do more to help out? Mohamed El-Erian, CEO and co-CIO of PIMCO, believes they should. He explains to the OECD Observer.

A floor has now been placed under the banking crisis, albeit at a very high cost to the public purse.

We are celebrating the OECD’s 50th anniversary during the tail-end of the worst financial and economic crisis of our lifetimes. It’s a good moment to take stock and to ask the right questions. Why couldn’t we avoid the crisis? Were the policies and the policy mix we promoted the right ones, and how can we adjust these polices to new realities? What is more, are we doing enough to prevent another crisis? Are our economic theories, our models and our assumptions still appropriate? How should our organisation’s work be adapted so that we continue fulfilling our founding mission of promoting better policies for better lives?

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