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December 7, 2009

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OECD says recovery could be firmer

COUNTRIES with mounting public debt jeopardize the sustainability of their economic recovery from the global financial crisis over the next several years, the OECD's new chief economist said in a interview in an Italian newspaper.

"The recovery could be stronger than expected," Pier Carlo Padoan, who is also vice director general of the Organization for Economic Cooperation and Development, told Corriere della Sera in the interview, which was published yesterday.

"But it does not mean it will be also more sustainable ... This growth is the result of public support policies of various types, it is not supported by private activity," Padoan said.

Global stocks soared and the United States dollar jumped last Friday bolstered by hopes the US economy was taking a solid step forward after government data showed fewer jobs were cut in November.

Padoan said the debt accumulated by some governments to kick-start their economies may become unsustainable, with one reason being the aging of populations.

The effects of governments' actions would be felt next year, but private sector demand would be "insufficient" even in 2011, he said.

Central banks, which have the difficult task of managing liquidity injected in the global economy to stop the crisis, should act gradually and in the framework of international cooperation, he said.

Padoan said Italy's economy, driven by exports, may gain from rising volumes of international trade.

OECD's latest economic outlook has forecast the global gross domestic product to grow 3.4 percent next year and the OECD countries to post a 1.9 percent GDP rise.


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