Tuesday 25 November 2014 8:48 pm

Eurozone needs more stimulus to see a revival

Chris Papadopoullos was City A.M.'s economics reporter until February 2016.

Chris Papadopoullos was City A.M.'s economics reporter until February 2016.

Follow Chris Papadopoullos

EUROPEAN officials need to boost their stimulus efforts to revive the Eurozone economy, an economic in­ter­national organisation has said.

The Organisation for Economic Co-operation and Development (OECD) warned that the currency union suffered from high public and private debt, tight credit conditions, high unemployment and falling inflation.

“The ECB [European Central Bank] should further expand its monetary support, including through asset purchases,” the report said.

The ECB has been purchasing private sector bonds. However, the market for them is small and the size of the programme has been disappointing compared with programmes seen in the US, UK and Japan.

ECB president Mario Draghi caused European bond yields to dive after signalling it was more likely the central bank would start buying bonds.

The OECD also said countries should take all available room under EU fiscal rules to avoid fiscal contraction. Germany, the Eurozone’s largest economy, had its GDP forecast sharply downgraded to 1.1 per cent since the last report in May which forecast 2.1 per cent growth.

The economic outlook for the UK and US was much more positive, with the robust recoveries in both nations expected to continue.


■ The Eurozone is expected to grow by 1.1 per cent in 2015 and 1.7 per cent in 2016.
■ The UK’s recovery is forecast to carry on with 2.7 per cent growth in 2015.
■ The US is expected to overtake the UK as the G7’s fastest growing economy with a forecast of 3.1 per cent 2015 GDP growth.
■ The figures compare with OECD averages of 2.3 per cent in 2015 and 2.6 per cent in 2016.