The activities of the Organisation for Economic Co-operation and Development (OECD) in 2011-2012

1The Parliamentary Assembly of the Council of Europe, enlarged to include the delegations of the national parliaments of the Organisation for Economic Co-operation and Development (OECD) member States which are not members of the Council of Europe, as well as a delegation of the European Parliament, is once again considering the activities of the OECD. The enlarged Assembly has reviewed the activities of the OECD in 2011-2012 in the light of the reports by the organisation and the report prepared by the Committee on Political Affairs and Democracy.

2Following the reform of the Assembly’s structures and working methods, which came into effect in January 2012, the Committee on Political Affairs and Democracy is now responsible for presenting the report. The Assembly has sought to make the debate more political and the enlarged Assembly also attaches importance to focusing on an assessment of the work of the OECD not only from an economic perspective, as it did in the past, but also from a political perspective. In this respect, the present report focuses on responses to the eurozone crisis and on support activities for the Middle East and North Africa region (MENA).

3The enlarged Assembly notes the background of the world economy against which the activities of the OECD have been conducted in 2011-2012. Major challenges are facing the world economy: while growth is stagnating or becoming negative, the risk of a financial disaster is increasing. The sovereign debt crisis and the measures taken to resolve it are having a severe impact on the countries in the eurozone’s periphery, while economies seem to be weakening all over the world.

4The OECD Secretary-General has highlighted four areas of policy action for member and partner countries’ governments to respond to the interlinked policy challenges related to a hesitant recovery: “go structural”, “go social”, “go green” and “go institutional”. Many countries are confronted with high unemployment, growing inequality (“go social”), high budget deficits and public debt. New sources of growth and measures to strengthen competitiveness need to be identified, including innovation, green growth, knowledge-based assets and skills (“go structural” and “go green”) to put OECD economies back on a strong, inclusive growth path. Restoring household and business confidence in markets, governments and institutions (“go institutional”), addressing long-term challenges related to rapidly growing populations in emerging and developing economies, tackling issues such as ageing in many developed countries, resource scarcity, climate change and global development, also have to be added to the policy “to-do” list to which the OECD contributes with its advice and recommendations. It is in this context that the OECD Ministerial Meeting – “All on board: Policies for Inclusive growth and jobs” – launched the initiative “New Approaches to Economic Challenges” (NAEC), which aims to draw lessons from the crisis, looking at trade-offs between different policy objectives and revisiting, where necessary, the analytical framework in order to develop a strategic policy agenda for inclusive growth.

5One of the most important consequences of the crisis has been the sharp rise in unemployment, especially youth unemployment. In this respect, the enlarged Assembly would remind the governments concerned that, according to recent research by the OECD, in periods of excess capacity, it is important to have in place policies that support job creation, avoid long-term unemployment and help the most vulnerable, in particular the youth, with targeted programmes and investment in skills and education. Active labour market policies and taxation reforms aimed at reducing levies on labour and shifting them towards consumption or environmental protection, can have relatively speedy effects on employment and help to support investment.

6However, rising inequality began long before the financial recession, and the slackening of growth has heightened its political resonance. According to recent research by the OECD, the growth of inequalities is due primarily to a considerable broadening of wage-derived income. While the opening of markets and technological progress have allowed productivity and growth to be increased, the least skilled workers have been the least able to grasp the opportunities thereby created. Since the mid-1990s, taxation and welfare systems have become less redistributive. The OECD places emphasis on improving the skills of the workforce to combat inequalities and a Skills Strategy was accordingly put before the member countries at the Ministerial Meeting in May 2012 to ensure that the necessary investments are supported by the development of appropriate skills. A review of taxation systems, combined with targeted programmes for the most vulnerable in welfare systems and reforms to reduce labour market segmentation, also seem necessary.

7In the same vein, the enlarged Assembly considers it relevant to endorse the International Labour Organization’s recent call for action on the youth employment crisis, aggravated by the global financial and economic crisis, which represents a challenge to the prosperity and cohesion of our societies. In this respect, youth employment measures and policies have to take into account that, even if education and training are essential for young people to enter the labour market successfully, better skills do not automatically translate into improved labour market outcomes and more jobs. Consequently, it is important to develop programmes specially focused on fostering youth access to decent and productive work and promoting youth entrepreneurship, with the aim of contributing to reinstating growth in a sustainable and fair manner.

8The enlarged Assembly notes with interest the OECD’s forecasts of an upturn in activity in 2013, at both global and European level. Decisions at political level are vital to bring this about. This should start with consolidation measures within the eurozone that are bolder than those taken to date, within a credible medium-term framework, as well as structural pro-growth reforms. Otherwise, Europe runs the risk of plunging into a spiral of bank busts, defaults and negative growth – a calamity that could jeopardise the entire European project.

9The causes of the sovereign debt crisis are multiple: low interest rates and easy access to credit led households, private companies, the banking sector and governments to become over-indebted; the lack of regulation of financial markets meant that banks neglected to manage their risks and became over-extended over the last 20 years. Government and banking sector debt reached untenable levels, triggering a crisis of confidence and, in some countries, a liquidity crisis. In the summer of 2011, financial markets began to question the ability of some European governments to finance their public borrowing, in part due to the increasing likelihood of their having to bail out their private banking sector.

10In this regard, the enlarged Assembly notes that the current crisis was also caused by the fact that legal measures were taken too late to prevent excess risk-taking by financial institutions, and therefore emphasises the importance of ensuring the effectiveness of the national and international regulatory framework, in particular the early warning mechanism for financial risk, in order to make the operations of financial institutions fair and reasonable. Further, the enlarged Assembly appreciates the OECD’s efforts to present the policy direction of financial regulation through its initiative “New Approaches to Economic Challenges”, and calls for the OECD to continue providing its member countries with the necessary expertise.

11The enlarged Assembly welcomes the measures that the eurozone members have been adopting in order to cope with this situation, such as the new financial support mechanisms (the European Financial Stabilisation Mechanism and the European Financial Stability Facility), created in May 2010, and the Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union, which should come into force in January 2013. This new treaty, aimed at providing enhanced policy co-ordination and surveillance within the eurozone, gives the European Commission and the Council the right to examine national draft budgets and, if necessary, suggest amendments, and makes the Commission’s recommendations binding under the Stability and Growth Pact.

12On top of the economic, employment and social difficulties, there are now doubts about the public’s acceptance of adjustment processes. In the economic report on the eurozone which it published in May 2012, the OECD recommends a range of measures in line with the guidelines recently adopted at European level and which are designed to address the sovereign debt crisis combined with targeted measures to invest in the skills and education of people and targeted support for the most vulnerable. The enlarged Assembly urges the governments concerned to make sure that the impact of the process is socially balanced and shared fairly throughout all sections of society so as to reduce inequalities. Public acceptance depends on this.

13The enlarged Assembly welcomes the valuable contribution made by the OECD to the consensual view and the agreements reached at the Rio+20 Conference aimed at achieving sustainable development, through its Green Growth Strategy. The OECD sees it as a practical and flexible approach that assesses economic and environmental policies together, in a way that points to an economic recovery based on the sustainable use of natural resources, efficiency in the use of energy and valuation of ecosystem services, which is compatible with economic growth, job creation and poverty eradication. At the same time, the enlarged Assembly recalls that these types of initiatives and efforts should contribute to States’ fulfilment of, and further commitment to, international environmental obligations.

14The Assembly recalls its Recommendation 2002 (2012) and Resolution 1885 (2012) “The young generation sacrificed: social, economic and political implications of the financial crisis”, Resolution 1884 (2012) “Austerity measures – a danger for democracy and social rights” and Resolution 1886 (2012) on the impact of the economic crisis on local and regional authorities in Europe. All these texts, adopted during the June 2012 part-session, point to a reorientation of the programmes to combat the crisis in order to promote economic growth while protecting the most disadvantaged groups of the population, in particular young people. The Assembly welcomes the path-breaking work of the OECD in this field and encourages it to continue to search for concrete policy solutions.

15In June 2012, the Assembly also adopted Resolution 1888 (2012) on the crisis of democracy and the role of the State in today’s Europe, which analysed the relationship between governance and the crisis, as well as the dangers to democracy linked to certain measures taken in response to the crisis. Its conclusions, pointing out that that Europe needs sound States based on strong democracies that can ensure proper representation and increased participation of its citizens at local, regional, national and transnational levels, could constitute valuable input to democratic deliberation in other OECD and non-OECD countries.

16Also during the June 2012 part-session, the Assembly adopted Resolution 1892 (2012) on the crisis of transition to democracy in Egypt and Resolution 1893 (2012) on political transition in Tunisia, which were follow-ups to its work on the recent political developments in those countries. It recalls once again its Resolution 1831 (2011) on co-operation between the Council of Europe and the emerging democracies in the Arab world, and it confirms its readiness to share its experience in democratic transition to facilitate their political transition.

17Therefore, the enlarged Assembly welcomes the OECD’s decision to enhance its co-operation programme with the Arab countries following the recent political developments. It notes that the OECD’s approach of enabling Arab countries to benefit from its expertise regarding reform, tapping into the expertise of its member States and creating the conditions for regional co-operation is very similar to that advocated by the Parliamentary Assembly in Resolution 1831 (2011). It calls on the OECD to co-ordinate and proactively contribute to various appropriate projects.

18It is crucially important, from the perspective of promoting global economic growth, that the OECD strengthens dialogue not only with its member States, but also with non-member countries that hold prominent positions in the world economy. In this regard, the enlarged Assembly hopes that the process towards full membership of the Russian Federation in the OECD will progress and include relevant democratic elements; it encourages the OECD to strengthen its relations with major partners, to expand its membership, and to continue to make proposals to major partners for the promotion of sound economic growth.

19Finally, the enlarged Assembly appreciates the OECD’s leading role in formulating various policy initiatives, such as job creation, improvement of the development policy, promotion of free trade and other policy issues referred to in preceding paragraphs. The enlarged Assembly also invites the OECD to provide the participants of the enlarged debate, at or by the next debate, with information regarding its policy initiatives on the issues to which this resolution refers.

20Lastly, the enlarged Assembly resolves to amend the Rules of Procedure for enlarged debates of the Parliamentary Assembly on the activities of the OECD (see Appendix) to take account of the reform of the Parliamentary Assembly’s structures and of the new apportionment of tasks among its committees.