The IMF and OECD are urging governments to spend – and a Green New Deal is the answer

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Yesterday the FT reported:

David Lipton, the acting IMF chief, has backed new monetary stimulus by the world’s top central banks to sustain the flagging global economy – in a thinly veiled nod to the US Federal Reserve and the European Central Bank as they consider easing policy.

In an interview with the Financial Times as G7 finance ministers and central bankers prepare to meet this week in France, Mr Lipton said that “in light of sluggish growth and downside risks, it makes sense for monetary policy in the major central banks to remain accommodative”.

Today the FT notes this:

Europe is not well enough prepared for an economic shock and faces a “crying need” to loosen the public purse strings to stimulate growth, the OECD’s chief economist has warned.

Laurence Boone, who joined the Paris-based organisation a year ago, told the FT there was “a big question mark” over Europe’s ability to give fiscal support to the economy, which has been weakened by trade tensions.

But the OECD was “seeing very little” fiscal support in the eurozone, Ms Boone said – “only 0.3 per cent of GDP, when we have revised growth down much more significantly than that”.

“The national governments which have fiscal space and a crying need for public investment are not doing it enough, that’s for sure,” she said. “That means the northern European countries including Germany and the Netherlands.”

This coincidence is not by chance. For all I know, it may be co-ordinated. And the truth is both calls are right.

The fact is that there is now a substantial risk of serious unemployment and under-employment in many economies around the world which will have a devastating effect on many. Despite that, right-wing governments dedicated to fiscal austerity that sucks the lifeblood out of economies and the people in them are refusing to spend when the evidence that investment is needed to deliver a Green New Deal is growing by the day.

Europe needs a Green New Deal.

The OECD is right to say that the capacity to pay for it exists. That capacity is the unemployment that will exist whilst we sit watching the world literally go to waste. Governments have to act. The time for balanced budget dogma is long gone.