OECD warns of global recession if US and Europe distress is not addressed

The global economy could easily end up in recession if its major problems - like US budget standoffs and Europe's lack of jobs  were not quickly addressed according to a  leading international economic body.

In its half-yearly update yesterday, the Organization for Economic Cooperation and Development warned that the recovery would ''hesitant and uneven'' over the coming two years and that a new major contraction could not be ruled out.

Home prices were up in the year ending in September by the most, since July 2010. According to OECD secretary-general Angel Gurria, the economy was far from being out of the woods and governments would need to act decisively, using all tools at their disposal to turn confidence around and boost growth and jobs in the US, Europe and elsewhere.

The secretary-general's downbeat assessment came as the OECD published a fairly dismal set of predictions. Though the world economic growth is projected at 3.4 per cent next year, up from 2.9 per cent in this year, the numbers serve to obscure big divergences around the world.

Though countries like China, Brazil and India would see a pick up in growth, the more established economies traditionally monitored by the Paris-based OECD remained stuck in a rut.

In particular, the OECD held out sharply depressed prospects for Europe than in its last forecast six months ago, saying ''the greatest threats to the world economy'' lay in the 17-country eurozone, which continued to grapple with a debt crisis after three years. It added, a deep global recession would also be possible, if the European crisis did not stabilise.