Reuters | Wed Jun 2, 2010 | 9:27am IST
Radical measures to correct public deficits that are being forced on governments by financial markets risk creating a new recession, the International Labour Organisation (ILO) said on Tuesday. The United Nations agency, which gathers unions, employers and governments to discuss employment issues, said public debt needed to be reduced in an orderly manner. But a report by ILO Director-General Juan Somavia said that pressure from financial markets was pushing countries into stringent fiscal policies that jeopardise recovery, making it less likely that growth, employment and wages — and hence tax revenues — will recover soon. That would make it harder to pay off debts, he said in a report submitted to the ILO’s annual three-week conference starting on Wednesday.
"Why now, at this very uncertain time of weak recovery, should the sovereign debt issue, with such a sense of a gathering storm, become the major, urgent, overriding global policy priority for markets?" Somavia asked. "This may not be in their own interests if it leads to greater economic contraction or even a double-dip recession. It was just such a response that helped to bring about the Great Depression of the 1930s," he said. Somavia said working families were already bearing a large share of the costs of the crisis and that would increase if sovereign debt resolution rather than growth and jobs became the priority. The experience of Latin America in the 1980s and Asia in the 1990s showed this could hurt social stability, he said.
Somavia called for quick collective action by governments to re-regulate the global financial system. Difficulties in agreeing on regulation, three years since the sub-prime crisis, were "another dimension of the test of wills being played out between governments and financial markets," he said. The ILO forecast in January that the number of jobless this year would remain around 2009’s record levels, rising to over 213 million or 6.5 percent of the workforce. The ILO conference will review the extent to which Myanmar is taking steps to observe international conventions on freedom of association and forced labour, as well as the labour policies of some 25 other countries. It is also expected to approve a new international convention on HIV/AIDS in the workplace.