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The OECD has again cut its growth forecasts for the eurozone and called on the
European Central Bank to consider doing more to boost growth.
The organisation said the eurozone will shrink by 0.6% this year, widening the
gap between it and faster-growing economies such as the US and Japan.
It said prolonged economic weakness in Europe could damage the global economy.
The forecast for the UK was also revised down to just 0.8% growth this year and
1.5% in 2014.
The OECD said the UK government's austerity plans had affected growth, but said
the measures were "necessary" and warned that "further fiscal consolidation"
was needed.
The predictions came in the OECD's twice-yearly Economic Outlook publication.
The organisation, which represents 34 advanced economies, forecast average
growth across its members of 1.2% this year and 2.3% in 2014.
Eurozone worries persist
It painted a troubled picture of the eurozone economy. The forecast of a 0.6%
contraction in GDP is down markedly from the 0.1% contraction forecast just six
months ago.
It said eurozone unemployment would continue to rise from its current rate of
12%, stabilising in 2014.
It blamed continuing austerity measures, weak confidence and tight credit
conditions. It hinted that the European Central Bank (ECB) might want to expand
quantitative easing (QE) as a measure to encourage stronger growth.
It warned the continuing weakness in Europe "could evolve into stagnation, with
negative implications for the global economy".
The US and Japan have seen a greater focus on stimulus measures compared with
Europe, where austerity measures have taken precedence.
Japan is forecast to grow relatively strongly this year, adding 1.6% to its GDP
on the back of extraordinary economic stimulus measures introduced by the
government this year.
But the OECD said there was considerable uncertainty over whether that recovery
would continue into 2014, when the government is expected to cut spending.
In the US, where growth of nearly 2% is forecast for this year, the OECD said
quantitative easing measures might need to be "gradually reduced".
China is not included in the OECD club, but the organisation expects its annual
growth to be about 8% over the next two years.
The organisation's chief economist, Pier Paolo Padoan, told Reuters that the
eurozone remained the dominant area of concern.
"Europe is in a dire situation," he told the news agency. "We think that the
eurozone could consider more aggressive options. We could call it a
eurozone-style QE."