KEY POINTS:
Angel Gurria, head of the Organisation for Economic Co-operation and Development, the world's foremost economic and policy forum, is undoubtedly suave. He is a member of the only club in Mexico that plays cricket (Reformer Athletic Club. Patrons: Queen Elizabeth II and Prince Philip).
"It's just across the
street from my house, so it is the best club by definition," says Mexico's former finance and foreign minister.
It is easy to imagine Gurria - a charmer confident enough to emphasise his point with little touches on the arm of his audience - sipping gin and tonics there. Less easy to imagine him sharing a bath in a rented room in Leeds with his wife in the teeth of the three-day week. But that was how he coped with his first taste of Britain in the early Seventies, as an MA economics student paid for by the British Council.
Gurria, 58, is grateful to Britain but you wouldn't know it listening to his economic assessment. Last week he met the Chancellor, the foreign, environment, business and education secretaries plus a collection of permanent secretaries in his role of ensuring world economic growth, better living standards and financial stability. For a renowned "consensus builder", his message was not exactly soothing.
"The UK is important, because it is one of the meccas of international finance," he said.
"That means you have more at stake in the stability and health of the system, and the downside risk is also higher." In the wake of the deepening credit crunch, he predicts a sharp rise in unemployment and slower growth than Chancellor Alistair Darling reckons.
Possibly the most awkward discussion he had was over the UK's inability to prosecute a single bribery or corruption case in overseas contracts since the OECD's convention came into being 10 years ago. Last March, the OECD sent a hit squad to Britain, only the third country to face such an interrogation. Many believe that Britain's failure to prosecute undermines the OECD's credibility.
Gurria does not deny this: "Every country that does not comply or is not active under its obligations is undermining, but also making it difficult for the ones which do comply. Why? Because the market is a single market ... If one group of countries complies and the others don't, there is only so much time that this first group is going to maintain their discipline."
Asked if that was what he told ministers, Gurria says: "This is something we say to all members."
But the OECD itself is not immune to criticism. Like other guardians of the world economy, it failed to warn about the threats posed by growing leverage and increasingly exotic "risk management" in the financial sector.
Gurria admits it must shoulder its share of the blame.
"I think we should take a degree of responsibility, though to be fair to the OECD, there are two, three or four lines of regulators involved in those issues before you get to the more general macro issues we deal with. I think we all should have seen it coming."
He says governments failed to rein in brokers and the money men in Wall St and the City - London's financial district - who were buying out the loans and feeding the boom, because financial innovation was viewed as a symbol of economic strength.
"Countries became rather proud of the fact that their banking industry was so creative, so aggressive. They were saying, 'Look, they're getting things off their balance sheets."'
Just months before Northern Rock had to be bailed out by the taxpayer, Gurria points out, the bank was boasting about how much extra capital it could free up and pay out to shareholders.
"I remember some bankers complaining bitterly that Spanish regulators were not flexible enough, saying, 'It's putting us at a disadvantage'," he says.
A year or so later, the Spanish banks have emerged almost unscathed from the financial crisis, while their British and American rivals have sustained such serious losses that they are holding out the begging bowl to cash-rich sovereign wealth funds.
Indeed, it is the US and Europe's response to state funds from the Middle East and China hoovering up assets on the cheap that helped to unleash a new wave of protectionism. Gurria predicts that the US$3 trillion ($3.9 trillion) sovereign wealth funds' investment will have quadrupled by 2020.
Gurria has no sympathy for those nervous about the long rumoured prospect of Gazprom, the giant energy firm regarded by some as an extension of Russian foreign policy, buying UK energy firms. Never mind the rows between BP and its Russian partner, he says, any investment should be judged on competition, corporate governance and corporate social responsibility criteria.
"Apply them all and why should you worry?" he booms. "If they try something, you have all the elements in the world to block them."
The growing protectionist mood in Europe and the US is "worrisome" in the light of a world trade ministers' meeting this month in the latest last-ditch attempt to save the Doha trade round. He argues that if agreement cannot be reached on trade, how will the world ever fashion a meaningful climate change strategy?
There is concern t the OECD is failing to deal with tax evasion.
Scandals centring on Liechtenstein's biggest bank, owned by the head of state, and UBS bankers in the US have ratcheted up fears that tax havens are incapable of monitoring the battalions of accountants, lawyers and bankers stashing trillions of dollars away from national exchequers.
This year, Gurria made strong public statements about the failure of certain tax havens to disclose information to governments about suspected tax evaders.
"The question is the capacity of countries and third parties to make sure the origin and destination of the money is legitimate, not the product of an illegal activity ... I'm talking about taxes. That is bad, but almost tame compared to money laundering and organised crime trying to pass their money through legitimate accounts and systems."
With the world's richest economies still struggling to come to terms with the consequences of the credit crunch almost a year after it erupted, Gurria is clearly as gripped as everyone else by the sorry tale of Masters of the Universe, supine regulators and poverty-stricken borrowers.
"In a way, what happened is that the fundamentals - a loan is a loan is a loan, and therefore you need some reserves against possible losses, depending on the riskiness, some capital to be allocated, etc - were not happening."
Now, he says, it is time for financial regulators to get "back to basics".
But not every country got it equally wrong, he adds, underlining one of the OECD's key arguments - even in a global economy, "national policies count".
ANGEL GURRIA
OECD secretary-general
Born: May 8 1950 in Tampico, Mexico
Education: BA in economics from UNAM (Mexico). MA in economics from Leeds
Career: Mexico Foreign Affairs Minister (1994-98). Finance Minister (1998-2000)
Family: Married with three adult children
Interests: Active in not-for-profit bodies
- OBSERVER
