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The Gospel of Growth

CANBERRA/SEOULAlmost four years after the start of the global financial crisis, the world economy remains fragile and unemployment is unacceptably high. There are roughly 200 million unemployed people worldwide, including nearly 75 million young people. Growth is weakening in many countries, risks are mounting, and uncertainty has intensified, owing especially to events in Europe. Only swift and sustained recovery can stem the rise in the human cost of economic stagnation.

When the G-20 meets in Los Cabos, Mexico, on June 18-19, its challenge will be to shift public perceptions from pessimism and concern about the future to an optimistic mindset of growth and stability. We need resolute action to address the uncertainty confronting the global economy and to chart a path toward self-sustaining recovery and job creation.

We see two components to such a strategy. First, we need a clear message from Europe – the immediate source of global economic concern – that it is taking decisive steps to stabilize and strengthen its banks, and that it is focused on restoring growth while credibly committing itself to fiscal consolidation. A crucial element of restoring confidence in Europe is agreement on a “roadmap” for the eurozone to underpin its monetary union with a fiscal union and a banking union, including pan-European supervision and deposit insurance.

It is essential that Europe move quickly to ensure that its banks are adequately capitalized and backstopped. In this regard, we welcome the recent decision by Spain to seek financial assistance from the European Union to recapitalize its banks as required. Decisive steps to safeguard the banking sector’s health are necessary not only to reduce some of the risks that are preoccupying markets, but also because healthy financial institutions are vital for economic growth.