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OECD cuts eurozone growth forecasts | OECD cuts eurozone growth forecasts |
(about 3 hours later) | |
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 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. | 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. |
Meanwhile, the European Commission has given France two more years to complete its austerity programme. | |
France fell back into recession in the first three months of the year. | |
Spain, Poland, Portugal, the Netherlands and Slovenia have also been given more time to complete fiscal tightening. | |
The move suggests a shift away from a focus on austerity in Europe. | |
Eurozone worries persist | Eurozone worries persist |
In its twice-yearly Economic Outlook, the OECD said prolonged economic weakness in Europe could damage the global economy. | |
The organisation, which represents 34 advanced economies, forecast average growth across its members of 1.2% this year and 2.3% in 2014. | |
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 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 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 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". | It warned the continuing weakness in Europe "could evolve into stagnation, with negative implications for 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 US and Japan have seen a greater focus on stimulus measures compared with Europe, where austerity measures have taken precedence. | 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. | 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. | 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". | 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. | 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. | 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." | "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." |