Europe weighing on global economy
BY ANGELA CHARLTON Associated Press
Wednesday, November 28, 2012
11/28/12 at 4:13 AM
PARIS - The global economy could easily slide back into recession if its major problems are left to fester, a leading international economic body said Tuesday.
In its half-yearly update, the Organization for Economic Cooperation and Development warned that the recovery will be "hesitant and uneven" over the coming two years and that a new major contraction cannot be ruled out.
"The world economy is far from being out of the woods," OECD Secretary-General Angel Gurría said. "Governments must act decisively, using all the tools at their disposal to turn confidence around and boost growth and jobs in the United States, Europe and elsewhere."
Gurria's downbeat assessment came as the OECD published a fairly glum set of predictions. Though the world economy is expected to grow by 3.4 percent next year, up from 2.9 percent this, the numbers mask big divergences around the world.
Though countries like China, Brazil and India are expected to see growth pick up, the more established economies that the Paris-based OECD traditionally monitors remain stuck in a rut.
In particular, the OECD was gloomier about Europe than in its last forecast six months ago, saying "the greatest threats to the world economy" lie in the 17-country eurozone, which continues to grapple with a debt crisis after three years. A deep global recession is also possible, it said, if the European crisis doesn't stabilize.
The downbeat report came despite signs that the eurozone crisis is ebbing. World markets rallied Tuesday hours after Greece's euro partners and the International Monetary Fund agreed to hand over more bailout cash to the country.
The OECD is now predicting a 0.4 percent contraction this year for the eurozone, worse than May's 0.1 percent forecast. For next year, it's forecasting a further 0.1 percent fall, in contrast to the previous prediction of 0.9 percent growth.
It also downgraded its forecasts for the U.S. economy and warned that it could be worse if the White House doesn't clinch a deal with lawmakers on the budget. Assuming a deal is thrashed out, the OECD has penciled in growth of 2 percent for the U.S. next year, down from a forecast of 2.6 percent in May.
The OECD cautioned that growth outside the OECD - which comprises 34 developed economies mostly in North America and Europe - would be slightly faster but crimped by Europe's troubles.
Original Print Headline: Recession threat seen from Europe
