The developed economies of the world are just beginning to face up to the massive debt problems ahead, a burden that will take a generation to unload, warns Angel Gurria, Secretary General of the Paris-based Organization for Economic Co-operation and Development (OECD).
While the focus now is on the crisis in Ireland and Greece, as well as continuing problems in Spain and Portugal, all of the major economies are in the same position, Gurria told CNBC in an interview, referring to the crisis as a “Mount Everest of debt.”
“We have unsustainable deficits throughout the OECD countries. And that includes the United States and that includes Japan. That includes the whole of Europe, practically the whole of Europe,” Gurria said.
Growth will continue, Gurria said, and countries will begin to address their individual problems, but the really tough decisions are still years away, he warned, as legions of workers in the biggest economies quit work and begin to draw promised pensions and health benefits.
“We’re going to find ourselves in a very uncomfortable situation in two, three, four years time. Then we’re going to have to come down from there, and by that time, we’re going to have the aging process come in. So, it’s going to take a generation to get out of this situation of the debt in the OECD countries.”
While equities investors refocused on the impact of decisions in Europe to contain roaring debt problems in Ireland and Greece, a new Reuters poll found that more than half of Americans back tax increases to help pay down the massive U.S. debt.
Fifty-two percent of voters said that a combination of tax increases and budget cuts would be the best way to attack the $14.3 trillion U.S. burden.
(Getty Images photo)
Nevertheless, Republicans are holding the line, arguing that only budget cuts are required. An upcoming vote on the U.S. debt ceiling hangs in the balance.
Republican House leader John Boehner has said that the GOP will block any increase not paid for by similarly sized cuts in spending.
That number is $2 trillion, based on a Treasury Department estimate of the increase in borrowing necessary to stave off another debt ceiling vote before Election Day 2012.
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