The crisis in the eurozone risks derailing the
global economic recovery, the Organization for Economic Cooperation
and Development (OECD) said in its latest economic outlook Tuesday.
The OECD predicted the eurozone economy would contract by 0.1 percent this year before recovering to 0.9 percent in 2013.
By contrast, growth in the United States is forecast to grow by
2.4 percent this year and 2.6 percent in 2013.
"The crisis in the euro zone remains the single biggest downside
risk facing the global outlook," the OECD's chief economist Pier
Carlo Padoan said.
The 17-nation eurozone risked falling into a "vicious circle
involving high and rising sovereign indebtedness, weak banking
systems, excessive fiscal consolidation and lower growth," the OECD,
which has 34 member countries, said.
The report comes on the eve of a summit of European Union leaders
to discuss ways to restore growth. Germany is insisting on fiscal
consolidation and structural reforms, while France is calling for
more infrastructure spending and eurobonds.
"Finding a careful balance between spending cuts and revenue
increases is critically important," the OECD said.
The Paris-based think-thank suggested a combination of measures,
including structural reforms, further enhancement of the eurozone
firewall and "better use" of the European Central Bank's balance
sheets.
The OECD specifically suggested that the ECB might be required to
step up its government bond purchasing programme.
