The recession in Europe could threaten the global economic recovery, warns a leading international organization. In its latest report the Organization for economic cooperation and development said that protracted economic weakness in Europe "could evolve into stagnation with negative implications for the world economy".
The OECD again slashed its forecast for the 17 European Union countries that use the Euro, announcing the reduction of 0.6 per cent this year after shrinking 0.5 percent, which occurred in 2012. In his report, made six months ago, the OECD predicted the Eurozone a decline of 0.1 percent — and at the same time last year it had predicted for 2013 growth to 1 percent.
The U.S. economy will continue to outperform the European, the OECD said, with growth of 1.9 percent in 2013 and 2.8 percent in 2014. In terms of global GDP the OECD predicts growth of 3.1 percent this year and 4 percent for 2014.
Noting that Eurozone policymakers are often "late", the OECD warned that Europe continues to be constrained by "weakly capitalized banks, requirements on financing of public debt and risk of exit from the Euro zone".
Meanwhile, the unemployment rate in the Eurozone, which now stands at 12.1 percent, is "likely to continue to grow ... and stabilized at a very high level only in 2014," according to the information summary.
According to the OECD forecast the unemployment rate next year will reach 28 percent in Spain and 28.4 per cent in Greece.
The Eurozone economy shrank 0.2 percent for the period from January to March, and this is the sixth consecutive quarterly decline, forming the longest recession in the Eurozone.
Austerity measures have inflicted severe economic damage and caused social unrest across the continent. Particularly vulnerable in Europe young people in these most affected countries like Spain and Greece, unemployment among young people is about 50 percent.
But the OECD Secretary-General angel Gurria also noted that the difficult reforms in these countries, to the liberation of the labour markets and improve the efficiency of public administration, will soon bear fruit.
"On the Eurozone periphery that are most affected by the crisis, reforms are being introduced at an accelerated pace, and I think the situation eventually will improve faster, when the acute phase of the crisis," Gurria told journalists.
The EU, uniting a population of half a billion people, is the largest export market in the world. If he continues to slide down, it will hit companies in the U.S. and Asia.
Last month the American company Ford Motor Co. suffered losses of $462 million in Europe and called the European perspective "questionable".
Other major economy this year looked uncertain, but did not experience the recession like Europe. The U.S. economy last year grew by 2.2 percent, and the economy of China, the world's second-largest, is growing at about 8 percent annually.
OECD calls on Europe to step up efforts to support economic recovery. Although the loose monetary policy of the European Central Bank helped, the organization said that "you can do more with further unconventional measures" and the creation of a pan-European banking system.
The organization also urged U.S. policymakers to adjust the automatic reduction of all expenditure items in the budget to reduce barriers to growth, and stated that "it is necessary to adopt a reliable long-term financial plan".
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