Rich countries should redouble efforts to increase flexibility in labour markets and boost competition even though they are suffering the worst recession since the second world war, the Organisation for Economic Co-operation and Development said on Tuesday.

Arguing that liberalisation was the surest route to a speedy recovery, the Paris-based international organisation locked horns with a vocal group of European economists, who have been extolling the virtues of labour market rigidities as a way of preventing deflation and depression.