OECD:Eurozone still biggest threat to economy

The OECD has insisted the euro area's protracted sovereign debt crisis will remain the biggest obstacle to a global economic recovery for quite some time to come. It's urged politicians to act faster. The Paris-based Organization for Economic Cooperation and Development (OECD) said in its latest forecast that slow developments in many eurozone nations would keep standing in the way of a sustainable global economic recovery next year, with sluggish growth in the US constituting an added uncertainty. The 34-member club of mostly western industrialized nations said Germany would be in a position to post meager 0.6-percent growth next year, while Greece, Italy, Spain, Portugal and Slovenia would remain mired in recession. "The euro area which is witnessing significant fragmentation pressures could be in danger," the report said, adding that the risk of a new major contraction could not be ruled out. Political resolve missing? The OECD said governments in the eurozone were forced to support their banks financially which in turn saw public debt soaring alongside the costs of fresh borrowing. "In the eurozone, the main risk is a lack of sufficient progress by policy makers in resolving the crisis," the organization maintained. It said faster action was required to arrive at a full-fledged banking union in the single currency bloc. The report also suggested that debt-stricken euro area nations should make use of the European Central Bank's bond-buying program to get their economies afloat again, while the ECB itself should consider lowering its benchmark interest rate even further. The OECD urged Washington to avoid the fiscal cliff by all means. It said reducing the US budget deficit was crucial, but added that cuts should be made gradually and in an orderly manner so as to avoid a global economic shock.