Eurozone set for patches of contraction

Julian Harris
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THE EUROZONE is likely to hit “patches” of economic contraction, the Organisation for Economic Co-operation and Development (OECD) warned yesterday.

OECD economists predict growth of just 0.3 per cent next year across the 17 nation single currency area, a level so low that it could involve periods of “mild negative growth”.

Yet policymakers could still deliver a stronger near-term outlook by implementing last week’s rescue package “promptly and forcefully”, the OECD said.

“These measures go in the right direction and could help restore confidence and create positive feed-back effects that could trigger a scenario of stronger growth,” it said.

Growth is expected to be sluggish throughout the world’s wealthier economies next year, the OECD forecasts. GDP expansion in America is estimated at just 1.8 per cent, with an even weaker average rate of 1.5 per cent predicted for the G20 as a whole.

And unemployment looks set to grow around the globe well into the present decade, a separate report from the International Labour Organisation (ILO) said yesterday.

The UN agency warned of “significant aggravation of social unrest” resulting from joblessness and economic troubles.

The downbeat news was echoed closer to home yesterday, as the Institute for Public Policy Research (IPPR) announced that the UK’s economic slump could last for six years.

“Growth figures will show slowest recovery in history,” the IPPR said, ahead of today’s first official estimate of UK growth in the third quarter of the year.

Quarter three proved a tough time for businesses in the capital, the London Chambers of Commerce announced this morning.

“Sales and orders fell significantly for London’s firms in quarter three, particularly in export markets,” the report said.

Elsewhere in Europe similar gloom was being spread, as the Bank of Spain estimated that the economy stagnated in the third quarter of the year. GDP expanded by just 0.7 per cent in the last 12 months, it added.