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TheStreet Open House

OECD: World Economy Picking Up But Europe Lagging

By SARAH DiLORENZO

PARIS (AP) â¿¿ The global economy is beginning to rebound, but Europe is lagging behind and unemployment rates, even in countries starting to see growth, are still too high, a leading international economic body said Thursday.

The Organization for Economic Cooperation and Development expects growth to accelerate in Japan and the United States in the first half of 2013. And though Germany will bounce back strongly, it says other countries that use the euro will contract or only grow slowly.

In an interim assessment that focused on the Group of 7 leading industrial economies, the OECD said that the European Central Bank needs to do more to encourage banks to lend and economies to grow.

For instance, Pier Carlo Padoan, the OECD's chief economist, said the central bank has more room to lower interest rates, even though they are already very low. He also said the ECB should follow the U.S. Federal Reserve's method of explaining its thinking and giving more information about what it plans to do in the future.

The report, which serves as an update to the OECD's November economic forecast, notes that countries that use the euro are making progress in reducing their debts, but that some should be allowed to meet their targets more slowly to temper the impact on their economies.

Padoan was careful to note that the OECD was not calling for European countries to abandon the deep budget cuts and tax increases many are making to reduce their debts. He said that eurozone countries must continue to reduce their structural deficits â¿¿ that is, deficits that persist over a long period because of sustained overspending. Such structural deficits have contributed to massive debts in European countries that led to the current crisis.

But he said the eurozone should show flexibility since reducing deficits too quickly can hammer growth.

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