The OECD has predicted that the eurozone economy will shrink in the fourth quarter by 1.0% and by a further 0.4% in the first quarter of next year.
For the UK, the OECD’s predictions are a 0.03% contraction this quarter and a further 0.15% next quarter, putting the country in a technical recession. However it expects the UK to grow by 0.6% in 2012.
The group also predicted rising unemployment in the UK with the unemployment rate increasing from 8.1% in 2011 to 9.1% by 2013 even as the economy recovers.
The group also revised its forecast for global economic growth downwards to 3.8% this year and 3.4% next year.
The OECD said that a major negative event in the euro area, such as a default by Italy or Spain, would likely trigger a global contraction.
The OECD report said: “More support is needed urgently as headwinds are strong.”
It also called for a credible commitment by euro area governments that contagion would be blocked, backed by clearly adequate resources.
It said: “To eliminate contagion risks, banks will have to be well capitalised.
“Decisive policies and the appropriate institutional responses will have to be put in place to ensure smooth financing at reasonable interest rates for sovereigns.
“This calls for rapid, credible and substantial increases in the capacity of the European Financial Stability Facility together with, or including, greater use of the European Central Bank balance sheet.”
David Tinsley, UK economist at BNP Paribas, said: “With the domestic demand in the UK already very weak heading into the crisis, it is hard to see where any growth next year will come from."
