JERUSALEM (Reuters) - Spain and Italy are doing all the right things and there is no reason why they should be paying such high interest rates, the head of the Organisation for Economic Cooperation and Development said on Tuesday.
Angel Gurria, the secretary general of the Paris-based OECD, told reporters in Israel that he was convinced Europe would end up stronger at the end of the debt crisis, but said current problems still needed to be resolved.
“There is no reason why Spain should be paying 7 percent, there is no reason why Italy should be paying 6 1/2 percent for their money when they are taking all the right decisions in terms of the constitutional budget amendment,” he said.
“They are working on their flexibility in their labour markets, they have increased their retirement age and all the things that we know.”
Spain’s borrowing costs have soared to around 6.6 percent for 10-year bonds with the risk premium over safe haven German Bunds reaching a euro era record. Italian yields also passed 6 percent recently on benchmark 10-year debt at auction.
“(Europe) created a common currency, they did not create a common fiscal mechanism. Now they go back to fix that question and now they are trying to deal with the consequences,” Gurria told a news conference.
“So I think Europe will in the end be stronger than it is today and will have stronger institutions. It is the meantime (present) that we have to deal with.”
Reporting by Ori Lewis; editing by Crispian Balmer