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OECD says EU crisis worsening
Global recovery could be derailed by the euro crisis, the Organisation for Economic Co-operation and Development (OECD) warned today.
PAMELA NEWENHAM
Global recovery could be derailed by the euro crisis, the Organisation for Economic Co-operation and Development (OECD) warned today.
According to the OECD's latest economic outlook, the global economy is gradually gaining momentum but the recovery is fragile.
The Paris-based group called on EU leaders to ease the pace of austerity, saying aggressive budget cuts to curtail the euro zone's debts threaten to suck the currency area into a downward spiral that could spill over into the global economy.
“The crisis in the euro zone remains the single biggest downside risk facing the global outlook,” said OECD chief economist Pier Carlo Padoan. "The risk is increasing of a vicious circle, involving high and rising sovereign indebtedness, weak banking systems, excessive fiscal consolidation and lower growth."
Video presenting OECD Economic Outlook
GDP growth across the OECD is projected to slow from an annual rate of 1.8 per cent in 2011 to 1.6 per cent in 2012, before recovering to 2.2 per cent in 2013, according to the outlook.
While euro area GDP is forecast to contract by 0.1 per cent this year, it is expected to pick up to 0.9 per cent in 2013.
Unemployment in Ireland will it 14.5 per cent this year according to the outlook, but will ease slightly to 14.4 per cent in 2012. It also predicts the Irish economy will grow by 2.1 per cent in 2013, which is lower than previous forecasts of 2.4 per cent.
Ireland - Economic forecast summary (May 2012)"With slow growth, high unemployment and limited room for manoeuvre regarding macroeconomic policy space, structural reforms are the short-run remedy to spur growth and boost confidence," OECD secretary-general Angel Gurría said.
The OECD said business and household confidence remained weak in Europe, while financial markets were tight and the adverse impacts of fiscal consolidation on near-term growth may be significant, particularly in countries hardest hit by the euro crisis.
The OECD warned that failure to act could lead to a worsening of the European crisis and spillovers beyond the euro area, with serious consequences for the global economy. Avoiding such a scenario requires action to be taken both at country and supranational level, it said. It said fiscal consolidation and structural measures must proceed hand in hand, to make the adjustment process as growth-friendly as possible.
German-led fiscal austerity policies have so far dominated the European Union's approach to solving Europe's devastating public debt crisis as leaders try to win back investors' confidence. But efforts to reduce deficits have caused the euro zone's economy to stagnate, making it harder to reach EU-mandated targets.
Global recovery could be derailed by the euro crisis, the Organisation for Economic Co-operation and Development (OECD) warned today.
PAMELA NEWENHAM
Global recovery could be derailed by the euro crisis, the Organisation for Economic Co-operation and Development (OECD) warned today.
According to the OECD's latest economic outlook, the global economy is gradually gaining momentum but the recovery is fragile.
The Paris-based group called on EU leaders to ease the pace of austerity, saying aggressive budget cuts to curtail the euro zone's debts threaten to suck the currency area into a downward spiral that could spill over into the global economy.
“The crisis in the euro zone remains the single biggest downside risk facing the global outlook,” said OECD chief economist Pier Carlo Padoan. "The risk is increasing of a vicious circle, involving high and rising sovereign indebtedness, weak banking systems, excessive fiscal consolidation and lower growth."
Video presenting OECD Economic Outlook
GDP growth across the OECD is projected to slow from an annual rate of 1.8 per cent in 2011 to 1.6 per cent in 2012, before recovering to 2.2 per cent in 2013, according to the outlook.
While euro area GDP is forecast to contract by 0.1 per cent this year, it is expected to pick up to 0.9 per cent in 2013.
Unemployment in Ireland will it 14.5 per cent this year according to the outlook, but will ease slightly to 14.4 per cent in 2012. It also predicts the Irish economy will grow by 2.1 per cent in 2013, which is lower than previous forecasts of 2.4 per cent.
Ireland - Economic forecast summary (May 2012)
The OECD said business and household confidence remained weak in Europe, while financial markets were tight and the adverse impacts of fiscal consolidation on near-term growth may be significant, particularly in countries hardest hit by the euro crisis.
The OECD warned that failure to act could lead to a worsening of the European crisis and spillovers beyond the euro area, with serious consequences for the global economy. Avoiding such a scenario requires action to be taken both at country and supranational level, it said. It said fiscal consolidation and structural measures must proceed hand in hand, to make the adjustment process as growth-friendly as possible.
German-led fiscal austerity policies have so far dominated the European Union's approach to solving Europe's devastating public debt crisis as leaders try to win back investors' confidence. But efforts to reduce deficits have caused the euro zone's economy to stagnate, making it harder to reach EU-mandated targets.