Debt Crisis: OECD urges ECB to cut interest rates as ‘severe recession’ threatens eurozone
THE Organisation for Economic Cooperation and Development (OECD) has warned the eurozone is at risk of a "severe recession" and cut its growth forecast for this year to 0.1pc.
It also urged the European Central Bank to cut interest rates from its record low of 1pc in a bid to fuel some growth in the region.
Looking at the Irish situation, the OECD cut its growth forecast for 2012 to 0.6pc from 1pc but expects the economy to growth by 2.1pc next year.
The Paris-based think tank also said the EU should take bloc-wide measures to boost growth and ease the fiscal adjustment in the eurozone where crisis risks are intensifying.
It called for "a further easing in the euro area" adding that"credibility and confidence would be enhanced by euro area and EU-wide measures".
The OECD said it expects eurozone consumer price inflation to 2.4pc this year and 1.9pc in 2013, while unemployment is set to rise to 10.8pc this year and 11.1pc next year.
The OECD held its 2012 global growth forecast steady at 3.4pc but it also warned that the eurozone crisis poses the most risk to the muted recovery in the world economy.
"The crisis in the euro area has become more serious recently, and it remains the most important source of risk to the global economy," said OECD chief economist Pier Carlo Padoan.
The OECD comments came just ahead of an informal Brussels summit tomorrow and as rifts deepened between France and Germany over the use of Eurobonds.
Germany is against such a move but new French president Francois Hollande is pushing the measure.
But Finance Minister Michael Noonan said today that Germany may be more open to the idea of eurobonds if and when the fiscal treaty is in place.
Meanwhile, the OECD improved its forecast for growth in the US this year to 2.4pc from 2pc previously, and said the world's top economy is on track for 2.6pc growth in 2013.
"In the US, growth should continue to strengthen as confidence is picking up in both businesses and households," the OECD said in a report.
International Monetary Fund chief executive Christine Lagarde was in London today where she said the UK economy is broadly flat and recommended more quantitative easing as a remedy there.