In a report released just days before a summit of G20 leaders in Cannes on 3 and 4 November, the Organisation for Economic Cooperation and Development slashed its 2012 growth forecast for the euro area to 0.3 per cent from 2.0 per cent in May.
It also cut its growth estimate for the United States to 1.8 per cent from 3.1 per cent, and warned of major downside risks to the global outlook if leaders fail in their bid to stop the sovereign debt crisis from rattling financial markets.
"A deterioration of financial conditions of the magnitude observed during the (2007-2009) global crisis could lead to a drop in the level of GDP in some of the major OECD economies of up to five per cent by the first half of 2013," the Paris-based organisation said in its report.
On the upside, if policy measures announced on October 26 at a summit of European leaders were implemented effectively, growth could prove better than expected, the OECD said.
But it warned uncertainties had increased dramatically in recent months, with Greece teetering on the edge of bankruptcy and threatening to topple European banks and other heavily-indebted euro zone countries.
Meanwhile the global economy is on the verge of a deeps jobs recession which could spark social upheaval, the International Labour Organization (ILO) has warned.
It will take at least five years for employment in advanced economies to return to pre-crisis levels, it said.
The ILO also noted that in 45 of the 118 countries it examined, the risk of social unrest was rising.