Eurozone warned of ‘severe recession’
PARIS – The 17-country eurozone risks falling into a “severe recession,” the Organisation for Economic Cooperation and Development warned yesterday, as it called on governments and Europe’s central bank to act quickly to keep the slowdown from dragging down the global economy.
OECD Chief Economist Pier Carlo Padoan warned the eurozone economy could contract by as much as two per cent this year, a figure that the Paris-based organization had laid out as its worst-case scenario in November.
In its twice-yearly global economic outlook, the OECD — which monitors economic trends for the world’s most developed economies — said its average forecast was for the eurozone economy to shrink 0.1 per cent this year and grow a mere 0.9 per cent in 2013.
“Today we see the situation in the euro area close to the possible downside scenario” in the OECD’s November report, “which if materializing could lead to a severe recession in the euro area and with spillovers in the rest of the world,” Padoan told reporters before the report’s release.
The report forecasts Europe falling further behind other countries, particularly the United States, whose economy is expected to grow 2.4 per cent this year and 2.6 per cent next.
“There is now a diverging trend between the euro area and the US, where the US is picking up more strongly while the euro area is lagging behind,” Padoan said.
Europe itself is increasingly split between a wealthier north continuing to grow and a southern rim that is sliding deeper into recession, the OECD figures show.
Germany, Europe’s largest economy, will accelerate to two per ent growth next year after 1.2 per cent growth in 2012, while France, the eurozone’s second-largest economy, will expand 1.2 per cent next year after 0.6 per cent growth this year, the OECD said.
Italy’s economy, by contrast, will shrink 1.7 per cent this year and 0.4 per cent in 2013, the OECD forecast. Spain is also set to remain mired in recession, with contraction of 1.6 per cent this year and 0.8 per cent next.