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EU Must Take ‘Credible’ Steps, OECD’s White Says: Tom Keene

European Union leaders must take credible steps to contain the region’s debt crisis and protect the euro, according to the Organization for Economic Cooperation and Development’s William White.

“It’s very important that they come up with something that’s really going to be credible here,” White, chairman of the OECD’s Economic and Development Review Committee, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt today. “It may well be that as people become increasingly concerned about what the markets are likely to do in the absence of action, there will be significant action. I’ve seen this many, many times in my career.”

Finance ministers are due to meet in Brussels tomorrow as governments try to regain the confidence of financial markets. EU President Herman van Rompuy faces the task of presenting leaders with proposals for treaty changes at their summit in Brussels on Dec. 9, a spokeswoman for the government of Germany said yesterday.

White, 68, a former Bank of Canada deputy governor, told Bloomberg Radio he was expressing personal views and wasn’t talking on behalf of the Paris-based OECD, which advises members on policy.

Growing doubt about the survival of Europe’s monetary union has caused global growth to stall and represents the “key” risk to the world economy, according to the OECD. The 34 OECD nations will grow 1.9 percent this year and 1.6 percent next year, down from 2.3 percent and 2.8 percent predicted in May, the group said in its twice-annual global economic outlook released today.

Bund Yields

Yields on 10-year German government bunds advanced four basis points, or 0.04 percentage point, to 2.30 percent today. The extra yield investors get for holding German debt over comparable Treasuries increased to 31 basis points, the widest spread since April 2009.

EU leaders “have got, I think, the right inclinations with respect to where they want to go in Europe,” White said. “Longer-term, they are talking in terms of major structural reforms. They just need the political will to get on with it.”

The euro appreciated 0.6 percent to $1.3320 today after German Finance Minister Wolfgang Schaeuble urged fast-track treaty changes to tighten budget discipline and Welt am Sonntag reported Chancellor Angela Merkel and French President Nicolas Sarkozy are planning a stability pact.

‘Coordinated Response’

“The most important thing at the moment is to get a coordinated response within Europe that deals at the same time with the short-run challenges and the long-run challenges that Europe faces,” White said. “The attitude of people outside Europe up until now has been that they’ve got the capacity to sort this thing out themselves, and what they have to find is the political means and the political will to do it.”

Germany and the European Central Bank have resisted calls for an expansion of the central bank’s bond-buying program, while France has urged the Frankfurt-based central bank to do more to calm bond markets.

Investors shouldn’t be alarmed by the results of the Nov. 23 German bond auction, which failed to get bids for 35 percent of the 10-year debt on offer, according to White.

“It turns out that it’s quite frequent that individual bond auctions are not fully covered,” he said. “In a sense there was nothing really unusual about that. It happens all the time. But of course in the context of everything else, it certainly attracted an awful lot of attention and made people feel that things were starting to get worse, even for Germany.”

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