OECD warns G20 to act as it slashes growth forecasts

Europe will grow by just 0.3 per cent next year and the US by 1.8 per cent, says Paris think tank

Parts of Europe will sink into recession next year, according to the Organisation for Economic Co-operation and Development (OECD). The Paris-based economic think tank has slashed its forecasts for growth in the euro area for 2012 to just 0.3 per cent, down from a 2 per cent forecast in June. It says that the eurozone will suffer "a marked slowdown with patches of mild negative growth". The think tank also forecasts that growth in the US will slump to 1.8 per cent in 2012, having previously forecast a 3.1 per cent expansion for the world's largest economy.

The OECD further warns that unemployment is likely to remain high in advanced economies for the foreseeable future and that trade imbalances in the global economy, which fuelled the 2008 credit meltdown, will "remain broadly unchanged" over the next two years.

The downbeat report on the global economy sets a gloomy scene for this week's G20 meeting in Cannes, where world leaders will come together to discuss, among other things, proposals for Asian nations to help to stabilise the European sovereign-debt crisis. The OECD argues that much of the present lack of confidence in the global economy is due to the prevarication of politicians. It calls on G20 leaders to act together in the manner of 2008, where they successfully avoided "a second Great Depression".

It says that eurozone leaders should implement the rescue package agreed at last week's Brussels summit "promptly and forcefully", but stresses that "more detailed information" is needed, in particular over how the firepower of the European bailout fund will be maximised. It also recommends that the European Central Bank (ECB) should cut interest rates in order to support flagging growth across the Continent. The new head of the ECB, Mario Draghi, who replaces Jean-Claude Trichet today, will give his first official press conference on Thursday. The think tank further argues that the US should slow its pace of spending cuts and tax rises "to avoid tipping the economy into recession".

The OECD's sobering message was reinforced by a report by the International Labour Organisation (ILO) yesterday, which argues that the global economy is on the verge of a new recession. Another slump, according to the ILO, is likely to trigger mass social unrest.

The OECD expects growth in Europe to recover to 1.5 per cent in 2013 and to hit 2.5 per cent in the US. But it also warns that, if the eurozone debt crisis takes a turn for the worse, and if the US cuts its deficit too rapidly, GDP in some major OECD nations could fall by up to 5 per cent by the first half of 2013. Despite the bleak outlook for the US and Europe, the OECD forecasts that emerging economies will still grow by 6.7 per cent in 2012. China's is forecast to grow by 8.6 per cent.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Kim Wilde began gardening in the 1990s when she moved to the countryside
peopleThe singer is leading an appeal for the charity Thrive, which uses the therapy of horticulture
Alexis Sanchez celebrates scoring a second for Arsenal against Reading
Life and Style
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Japan's population is projected to fall dramatically in the next 50 years (Wikimedia)
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own