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We cannot spend anymore: OECD's Gurria

OECD: It's time to embrace structural reforms

It's no longer possible for developed economies to spend their way out of their difficulties, the secretary general of the Organisation for Economic Co-operation and Development (OECD) told CNBC on Tuesday.

In order for the global economy to meet the G-20 target to create 2 percent additional gross domestic product (GDP) growth over the next five years they will no longer be able to rely on monetary or fiscal measures, Gurria said

"To [achieve 2 percent additional growth] you've got to go structural - we've used all the monetary policy room that we have, or [we] almost [have], and we've used all the fiscal policy room that we have, " Gurria added.

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Gurria said a more structural approach is needed to tackle the difficult issues such as education, innovation, competition and flexibility in labor and product markets.

"It's a more complex set of issues and they all have to be done in the right sequence and mostly as a simultaneous set rather than one single issue at a time," he added.

Gurria's comments on the exhaustion of economic policy echo those of Thomas Picketty, the author of 'Capital in the Twenty-first Century' who argues that an over reliance on central banks to fix economic problems is a major problem in the U.S. and Europe.

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But Gurria said his view differs because he believes governments are running out of room to use fiscal policy – the use of government revenue collection (taxes) and expenditure to influence the economy – as well as monetary policy.

Organisation for Economic Co-operation and Development (OECD) Secretary General Angel Gurria.
Adam Berry | Getty Images

"We're running out of room in fiscal policy too, and why? Can we get out of this rather mediocre type of growth by spending more? No we've been there and done that," he said.

"We've got out of the big recession by spending and we have increased the debt-to-GDP ratio in the OECD countries by 30 to 35 percent. That means we can't continue to spend our way out of this mediocrity," he added.

The U.S. Federal Reserve began aggressively buying Treasury bonds and mortgage securities in late 2008, flooding financial markets with cheap money. Gurria has not been shy in voicing his concerns over the global impact of the Fed's stimulus program, telling CNBC last year that the world needed the U.S. economy off "steroids" and for normality to return to financial markets.

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But while the Fed has started winding down its stimulus program, other global economies have only recently begun easing.

In April last year, the Bank of Japan shocked markets by announcing plans to double its purchase on Japanese bonds to $79 billion worth a month in an effort to drag its economy out of decades of deflation. Meanwhile the European Central Bank is broadly expected to start its own quantitative easing program this year.