OECD Warns Of Severe European Recession

PARIS (AP) — The 17-country eurozone risks falling into a “severe recession,” the Organization for Economic Cooperation and Development warned on Tuesday, as it called on governments and Europe’s central bank to act quickly to stop the slowdown spilling over into the global economy.

OECD Chief Economist Pier Carlo Padoan said the eurozone is “close to” the possible scenario of a 2 percent economic contraction this year that the Paris-based think tank laid out as its worst-case scenario last November.

Padoan made his comments as the OECD, which comprises the world’s most developed economies, released its twice-yearly global economic outlook. The report forecasts a longer and deeper contraction in the eurozone than predicted in November, with the eurozone economy expected to shrink in 2012, and only manage a feeble recovery in 2013.

“Today we see the situation in the euro area close to the possible downside scenario” in the OECD’s November report, “which if materializing could lead to a severe recession in the euro area and with spillovers in the rest of the world,” Padan told reporters before the report’s release.

The OECD’s new forecast shows Europe falling behind the United States, where growth is seen accelerating both in 2012 and 2013.