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OECD says eurozone crisis threatens global economy
By:
ThinkSpain , Tuesday, May 22, 2012

The Organisation for Economic Co-operation and Development (OECD) has today warned that the crisis in the eurozone is currently the single biggest threat to the global economy.

The economy of the 17 nations that use the euro will shrink by 0.1% this year, before recovering a 0.9% growth next year, the OECD predicts. By contrast, the US economy is predicted to expand by 2.4% this year and by 2.6% in 2013.

In November last year, the organisation warned of a "deep recession with large negative effects for the global economy" if measures were not taken in the eurozone to tackle the crisis.

On Tuesday, its chief economist Pier Carlo Padoan said: "The immediate dangers of such developments have receded somewhat since last autumn, although... the dangers have not disappeared.

"Failure to act today could lead to a worsening of the European crisis and spillovers beyond the euro area, with serious consequences for the global economy."

Ahead of an informal summit of European Union leaders in Brussels on Wednesday, the OECD seemed to back calls from the new French president to enact measures such as "increasing European Investment Bank funding for infrastructure projects".

The organisation expects the unemployment rate to stay high in the euro area - 10.8% this year and above 11% next year.  The jobless rate is currently 10.9%, the highest since the euro was formed in 1999.

Mr Padoan also highlighted the backlash against austerity measures across Europe, which has seen street protests in Spain and a number of other countries, and resulted in the recent election of François Hollande in France.

"Elections in a number of euro-area countries have signalled that reform fatigue is increasing and tolerance for fiscal adjustment may be reaching a limit," he said.

"Rising unemployment and social pain may spark political contagion and adverse market reaction", with countries outside the euro also at risk of being hit, he added.

 
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