Thursday

8th Dec 2022

OECD admits failure to understand scale of eurozone crisis

  • The OECD said it made its biggest forecasting errors since the 1970s oil crisis (Photo: oecd.org)

Failure to appreciate the scale of Europe's banking crisis led to the most significant economic forecasting errors since the oil crisis in the 1970s, the Organisation for Economic Co-operation and Development has said.

The admissions were contained in a 'post-mortem' report on the eurozone crisis published by the Paris-based think tank on Tuesday (11 February),

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

“The repeated deepening of the euro area sovereign debt crisis took us by surprise, because of the stronger-than-expected feedback between banking and sovereign weaknesses," OECD Chief Economist Pier Carlo Padoan said at an event launching the paper in London.

“We have learned a lot from the crisis,” he added.

The organisation’s economic projections repeatedly under-predicted the extent of the collapse in activity during the 2008-09 financial crisis and then over-estimated the pace of recovery in the following years. The eurozone fell into a double-dip recession in 2011-12 before returning to anaemic growth of 0.2 percent in 2013.

”We have taken steps to improve short-term forecasting models, construct better indicators of financial conditions and explore the risks around our forecasts more systematically,” Padoan said.

He added that the belief that the eurozone's debt crisis would gradually play itself out was the biggest mistake made by analysts.

“It was the repeated assumption that the euro crisis would dissipate over time, and that sovereign bond yield differentials would narrow, that turned out to have been the most important source of error.”

But the OECD is not the first to face the charge that it underestimated the scale of the crisis.

Accusations of poor and over-optimistic forecasting have also been laid at the door of the European Commission and the International Monetary Fund, particularly in respect of Greece's bailout.

Greece has experienced one of the deepest peacetime recessions to hit an advanced economy. The country's output has reduced by more than 25 percent in the past six years. Meanwhile, unemployment has soared to 27 percent with youth joblessness hovering over 60 percent.

But the OECD report says that although it failed to forecast the scale of the downward impact austerity policies would have on economic growth in Greece, this was less of a factor in the rest of the eurozone.

OECD raises eurozone growth forecasts

The eurozone is likely to grow by 2.7 percent this year, the OECD said on Tuesday upgrading its growth forecasts for the 12-nation zone.

Illegal pushbacks happening daily in Croatia, says NGO

More than 1,600 testimonies of alleged illegal pushbacks of migrants and refugees throughout the EU has been published, collated by the Border Violence Monitoring Network and the Left party — adding to the mounting evidence of abuse.

Stakeholders' Highlights

  1. Nordic Council of MinistersLarge Nordic youth delegation at COP15 biodiversity summit in Montreal
  2. Nordic Council of MinistersCOP27: Food systems transformation for climate action
  3. Nordic Council of MinistersThe Nordic Region and the African Union urge the COP27 to talk about gender equality
  4. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  5. Friedrich Naumann Foundation European DialogueGender x Geopolitics: Shaping an Inclusive Foreign Security Policy for Europe
  6. Obama FoundationThe Obama Foundation Opens Applications for its Leaders Program in Europe

Latest News

  1. EU lets Croatia into Schengen, keeps Bulgaria and Romania out
  2. Energy crisis costs thousands of EU jobs, but industrial output stable
  3. Illegal pushbacks happening daily in Croatia, says NGO
  4. No, Bosnia and Herzegovina is not ready for the EU
  5. EU takes legal action against China over Lithuania
  6. EU Commission shoring up children's rights of same-sex parents
  7. The military-industrial complex cashing-in on the Ukraine war
  8. EU delays Hungary funds decision, as Budapest vetoes Ukraine aid

Join EUobserver

Support quality EU news

Join us