By GEOFFREY T. SMITH And WILLIAM HOROBIN
The Organization for Economic Cooperation and Development Tuesday slashed its forecasts for growth across the euro zone for this year and next, and warned that the area's debt crisis could pull it into a vicious downward spiral without the right policy action.
The OECD sees euro-zone gross domestic product shrinking by 0.1% this year, down from its previous forecast of growth of 0.2%. It sees growth of 0.9% in 2013, down from its previous outlook of 1.4%. The organization said it expects the jobless rate to rise to 11.1% by the end of next year as a result, from just over 10% now.
The cut is due largely to sharp recessions in Spain and Italy, where the OECD sees GDP shrinking by more than 1.5% in both countries this year. It forecast even sharper contractions of 5.3% in Greece and 3.2% in Portugal this year, but says both will start growing again in the second half of 2013. It has a rosier outlook for the 'core' economies of France and Germany, both of which it expects to grow for the next two years.
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