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Global Growth Likely To Lag Despite Europe Rebound

The OECD also cautioned about the impact of another damaging fight over the U.S. budget. A little over a month ago, the U.S. narrowly avoided technically defaulting on some of its debts following a protracted and often dysfunctional battle in Congress over the budget and the raising over the debt ceiling.

"Brinkmanship over fiscal policy in the United States remains a key risk and uncertainty," Pier Carlo Padoan, the OECD's chief economist, wrote in a commentary accompanying the report.

The OECD recommended that the U.S. scrap its policy of capping borrowing with a debt ceiling and instead come up with a more reasoned plan to reduce debt.

But with the risk that the U.S. won't come up with such a plan in mind, the OECD slightly lowered its expectations for U.S. growth, saying GDP would rise 1.7 percent this year and 2.9 percent next.

The eurozone, on the other hand, is beginning to improve, the OECD said, although risks remain. It predicted that, overall, the eurozone will shrink 0.4 percent this year, as compared with the 0.6 percent slide forecast in May.

But the report warned that the recovery is uneven, and unemployment won't begin to fall a¿¿ from very high levels a¿¿ until next year.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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