Sticking to bailout terms offers best chance, says OECD

Structural reforms including wage reductions, labour market reforms and changes to unemployment benefit will have much less effect on improving Ireland’s economic performance because many of the adjustments have already been made, according to the OECD.

But sticking to the bailout programme and abiding by the policies the country has set out offer the best chance to regain the confidence of the markets, and this in turn will lead to a resumption of growth and job creation.

Secretary-general of the Paris-based organisation, Angel Gurría, insisted that while the EU has done much to protect the eurozone, “the mother of all firewalls” should be put in place to ensure speculators will not even attempt to attack the area.

Ireland has been asked to make just four headline structural reforms — three in opening up services including lawyers and one in competition.

So far the country is the only one where competitiveness has been improved, mainly through unit labour cost reduction, said the body’s annual economic survey of the EU economy.

But returning to growth for both creditor and debtor countries will be difficult, and even when reforms are made, the results will not be visible immediately.

“But our research shows that even though the cost of reforms may be high, it is compensated by a confidence bonus when we look at the medium and long term,” it said.

Together with an ambitious programme of reforms in product and labour markets, tax systems and education, member states need to make a real political commitment to the Single Market.

“National regulations, rigidities and poor implementation of existing EU rules are frequently holding back cross-border economic activity, growth and job creation, and are undermining the EU economy’s efficiency and competitiveness,” the OECD found.

“Greater progress is needed in opening services markets,” said the report, which also called for an annual review for each country of the obstacles to opening up the market of 500m consumers, and eliminating national borders.

The survey highlights the need for fundamental changes to financial supervision and regulation and says: “Europe needs an effective system of crisis resolution and excessively close tiesbetween domestic banksand governments need to be undone.”