Economist: Three largest European economies due to shrink this year
Europe's strongest economies -- Germany, France and Italy predicted to sink into recession
Good news: The global economy was not in recession. Bad news: Avoiding one depends on what politicians do in the near future, in particular the European Central Bank. The bank needs to formulate a plan to buy up the bonds of governments struggling with high borrowing costs, according to the Organization for Economic Cooperation and Development's Chief Economist Pier Carlo Padoan.
According to the Organization for Economic Cooperation and Development's Chief Economist Pier Carlo Padoan, the Eurozone's ongoing debt crisis is pushing the 17-nation partnership into recession.
The Eurozone's ongoing debt crisis is pushing the 17-nation partnership into recession. Europe's strongest economy, Germany is suffering from sluggish growth. It's predicted that Germany may very well slip into recession before the beginning of the New Year.
Padoan expressed his optimism that many factions are pulling together to address the crisis.
He reiterated that high borrowing rates are at the heart of the European crisis and have forced some nations to seek bailout loans. Italy and Spain, two of Europe's largest economies are suffering high rates. Some fear that Europe won't be able to rescue them - can't afford to let them sink.
Padoan scoffed chiefly German concerns that that ECB intervention could push up inflation. He said it wasn't clear that bond-buying would increase inflation - and in fact that Europe could benefit from more inflation.
The OECD, which monitors economic trends for the world's most developed economies - said in May that the 17-country eurozone could contract by as much as two percent this year. Padoan declined comment.
The report maintains that a recession is "taking hold" in the eurozone and predicts Europe's three largest economies that use the euro, which is Germany, France and Italy will shrink by 0.2 percent this year.
The eurozone economy shrank 0.2 percent in the second quarter of the year after growth was flat in the first quarter, According to the statistics agency Eurostat, a recession is defined as two consecutive quarters of negative growth.
The latest report says it expects the U.S. to grow 2.3 percent this year, just off its May prediction of 2.4 percent.
Significant uncertainty marks the organization's predictions and that the global economy faces several risks that could further drag down growth, Padoan warned.
The largest is the European response to its debt crisis, which is most responsible for the poor outlook. But Padoan also cited the so-called "fiscal cliff" in the U.S., a reference to the end of the year when a series of tax increases and spending cuts takes effect.
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