OECD’s Gurría: ‘People are angry and frustrated’

Secretary-General of the OECD Angel Gurria, attends a press conference in Berlin, Germany, 11 June 2018. [EPA-EFE/OMER MESSINGER]

OECD Secretary-General Ángel Gurría has blamed governments for the rise of populism and political fragmentation across Europe, claiming they also did not deliver benefits that were promised to citizens, he told EURACTIV in an interview. 

On the day of a landmark agreement between France and Germany to deepen the eurozone, Gurría said that strengthening the bloc is “the most important and meaningful” long-term transformation for the union.

Ángel Gurría is secretary-general of the OECD. Prior to that he was secretary (minister) of Foreign Affairs and Finance in Mexico.

He spoke with EURACTIV’s Jorge Valero

Your organisation always calls for reforms. But the rise of populist forces can disrupt reform efforts or unravel those already adopted. These parties are also making Europe more unmanageable. Looking at Europe today, are you concerned about its progress?

Who is against education or regulatory reform, or more competition? My answer is nobody. Everybody agrees that we should look at that. I would say there is very broad common ground. You may have different ideas about migration or Europe, whether you are populist or rightwing, or leftwing. But on the substance of the structural agenda I think there is very broad agreement. On the other hand, if we don’t have a lot of room on the monetary policy side and the fiscal policy, because you want to keep deficits and debts down, then the only game in town is going structural. 

But we have to take a look at the messages the results of the elections are giving us. Seven months in the Netherlands to form a government, five months in Germany. The results in Italy, in Austria, in Spain… or Brexit. What you see is angry and frustrated people that did not get the benefits…

But in Spain the government left because of corruption…

Let’s be objective. Corruption was what triggered the no-confidence motion. What I am talking about is 27% unemployment in Spain, which has gone down to 16%, still one of the highest rates. Youth unemployment is also very high. What I am talking about is that we did not deliver, whether in Italy or in Spain or in Germany, or in the Netherlands or in Austria, we didn’t deliver in the UK either. A lot of people were left out of the process. Those are the ones who today are voting against. Or what caused the political fragmentation in Spain. The fragmentation leads to fragility and that affects the quality of the governance.  But a worse problem is when they don’t vote. For Brexit, 60% of young people, whose future was at stake, did not vote. And that’s probably even more dangerous.

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British Prime Minister Theresa May will address the World Economic Forum today (19 January) to try and convince the global elite of the soundness of her Brexit plan. A staunch critic of Brexit in the past, OECD Secretary-General Angel Gurría now offers his support to the British government to minimise the damage caused by the break-up.

The next summit is seen as the moment of truth to deepen the eurozone. But migration has come up as the number one issue. Is there a risk that the eurozone reform may lost its momentum?

The eurozone is not a matter of a meeting, or one particular year. Deepening the eurozone is the most important and meaningful, far reaching medium- to long-term transformation. Going for  the single market and an integrated market of electricity, energy, telecoms, banks. Those things are the ones that are going to define the future of Europe. But the issue of migration is very divisive. 

How do you see the handling of migration?

Migration is net positive for the recipient government, but it has to do a down payment, like an investment. You invest at the beginning and then you wait for the investment to have a return. The problem is that it is not only a monetary question, it is also about integration. How you make it smooth, seamless, something that is not socially disruptive or politically unmanageable. This is where the policy fails or succeeds. There is a way in which the policy can be a winner if you have good integration policies, especially in countries which are getting older and where the integration of these mostly young men and women [immigrants] can complement demographics.

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Coming back to the eurozone, France and Germany are trying to finalise a consensus today (19 June). What should be the minimum achievement during the summit next week? 

Depends on what will be the main issue on the agenda. First of all a common migration policy for Europe would be enormously important. Difficult as it may seem, it becomes more and more important because Europe has many borders, many ways and the issue is happening in many parts. So there has to be an homogenous way to deal with the problem.  Second. You will have to deal with Greece, because it will exit the programme. We said that when Greece is out of the programme and they comply with it there would be debt relief. We are all in favour of debt relief. The question is whether it is politically realistic to have nominal debt reduction. Today it looks difficult. But, can we have debt reduction in present value terms, where you play with the terms the repayment periods and the interest rates? Hopefully it will be possible and it will give the benefit to Greece of being able to get the reward of their own efforts of reform. Thirdly, leaders will have the EU budget. The budget is getting lower and lower in terms of percentage of GDP and total public expenditure of EU countries. What we say is that there are a lot of needs that are being demanded from the EU, and member states are giving less and less money. There is an inconsistency there. Of course you have to show that you spend the money wisely, but countries have to pay more.

How do you see your progress made on the digital tax, following the presentation of the European proposal?

We put out our interim report on this issue during the G20 in March. The report said that there is no consensus about how to tax the digital world. The Europeans published a proposal for a 3% turnover tax. This is not consensus, it is a European Commission’s proposal. Within Europe there are a number of countries that do not want to take any short-time measure. But in many countries there is what I would call the political imperative to take the measures. It is perceived that it is a demand by the public. I accept fully that we have to do something about it and I certainly believe that we should tax the increasingly digitalised world economy, not only the GAFAs (Google, Apple, Facebook, Amazon). Countries have requested the OECD to deliver its recommendations not in 2020, when it was originally scheduled, but in 2019. But we can only deliver a recommendation to the extent that there is consensus. If there is no consensus what we can do is to report on the differences, as we did last March.

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The OECD will unveil in April its first conclusions on how to tax internet companies. In an exclusive interview with EURACTIV, its secretary general Ángel Gurría expressed concern about the fragmentation of the EU’s response, expected in March.

Is there a risk that you will have to water down your proposal too much in order to reach a consensus?

There is no reason why you should think about that. Either we are going to tax the digital world or not. There is also a very important evolution in the US after the tax reform.  The Treasury team has been exploring it with a very open minded, rather than with a very protective mind. Before, even during the period of President Obama, they had a very strong position which was very protective of their companies. Now it is a much more open position, and that is helping for the discussions to be much more convergent. We are making progress. So hopefully in 2019 we will issue our final recommendation. If not, it means we are still stuck.


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