Leaders of the world’s richest nations meeting at the G20 Cannes Summit (November 3-4) were put on notice by the organization that represents their interests that they must take ‘bold action’ to ward off further shrinking of the global economy.

Angel Gurria, head of the 34 nation Paris-based OECD (Organization of Economic Cooperation and Development), said in a pre-summit briefing that the status quo is not acceptable and that restoring confidence is the responsibility of developed countries.

"Much of the current weakness is due to a generalized loss of confidence in the ability of policymakers to put in place appropriate responses,” he said. “There’s nothing usual about the situation today, nothing usual with 10 per cent average unemployment, 20-to-30 per cent youth unemployment … nothing usual with a European debt crisis.”

In an accompanying report, the OECD said that the banking crisis in Europe and the near-deadlock among decision-makers in the United States over its massive national debt have dramatically increased the gloomy global economic outlook in the short-term.

The OECD has projected weak GDP growth in the advanced G20 economies over the next two years and warned that the pace of activity in major emerging markets is likely to be lower than in the pre-crisis period.

Gurria called the measures taken (October 26) to deal with Greece and insure the debt crisis does not spread to other European countries, was “a step in the right direction,” but he urged the G20 to go further to break the link between sovereign debt and banking distress.

Other ‘appropriate policy responses’ recommended by the OECD for consideration at the G20 Summit included keeping interest rates in other developed countries on hold, taking measures to spur growth and to tackle high unemployment.

At the end of the two-day Cannes Summit, G20 leaders are expected to adopt an Action Plan to boost growth, following up on their successful work to prevent the 2007 financial crisis from plunging the global economy into a depression.

(Photo © OECD)