The recession in Europe risks threatening the world’s economic recovery, a leading international body warned Wednesday.
In its half-yearly update, the Organization for Economic Cooperation and Development said that protracted economic weakness in Europe “could evolve into stagnation with negative implications for the global economy.”
The OECD again slashed its forecast for the 17 European Union countries that use the euro, saying it will shrink by 0.6 percent this year, after 0.5 percent drop in 2012. The OECD had predicted a 0.1 percent decline for the eurozone in its report six months ago – and this time last year, it forecast growth of nearly 1 percent for 2013.
The U.S. economy will continue to outpace Europe, the OECD said, with growth of 1.9 percent in 2013 and 2.8 percent in 2014. For global gross domestic product, the OECD forecasts an increase of 3.1 per cent for this year and by 4 percent for 2014.
Noting that eurozone policymakers have “often been behind the curve,” the OECD warned that Europe was still beset by “weakly capitalized banks, public debt financing requirements and exit risks.”