Paris (MNI) – Uncertainty about the outlook for Group of 20
economies has “risen dramatically”, while the Eurozone looks set to
experience a “marked slowdown” in growth, the Organization for Economic
Cooperations and Development said on Monday.

In an analysis of G20 economies released prior to this week’s
summit in France, the organization said that the outlook could be even
worse if Eurozone leaders fail to deliver on commitments made at the
October 26 summit in Brussels.

“The outlook would be gloomier if the commitments made by EU
leaders fail to restore confidence and a disorderly sovereign debt
situation were to occur in the euro area with contagion to other
countries,” the OECD report said.

OECD economists said economic growth in the Eurozone would slow
from 1.6% this year to just 0.3% in 2012. In May, the organization
forecast Eurozone growth of 2.0% for both years.

The organization also cut growth forecast of other major G20
economies, including the United States. The U.S. economy is now expected
to growth by 1.7% and 1.8% in 2011 and 2012, down from a May forecast of
2.6% and 3.1%, respectively.

Emerging market economies are expected to soften slightly but in
general remain buoyant. The OECD expects the Chinese economy, for
example, to grow by 9.3% this year and 8.6% in 2012.

The organization said central banks in advanced economies should
provide sufficient liquidity to calm market tensions and should lower
interest rates where possible. In particular, it said that where
monetary tightening has already begun, as in the Eurozone, interest
rates should be lowered.

In Europe, resources to prevent contagion from high-risk countries
“could come either directly from the national authorities and/or by
increasing or leveraging existing EFSF funds and from greater use of the
ECB balance sheet,” the organization said.

The OECD also called for a strong response from G20 leaders meeting
this week to discuss and “action plan” to spur global growth.

“Decisive action by the G20 can restore confidence and trigger the
more optimistic scenario needed for growth and job creation.” the
organization said. “In 2008, G20 leaders rose to the challenge with a
clear and coherent plan and a second Great Depression was avoided.”

The adoption of such a plan today “is just as imperative to restore
confidence” the organization said.

– Paris bureau: +331-4271-5540; jduffy@marketnews.com

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