The economy in Europe will shrink in 2013 and the U.S. will experience a slower growth period than what was previously forecast said the Organization for Economic Cooperation and Development on Tuesday.
A new forecast by the OECD says that gross domestic product will fall by 0.1% in 2013 in the area of the eurozone, the area where 17 countries use a common currently. Previously, the OECD had expected there to be growth of 0.9%. The yearend growth rate for the current year was also cut by the OECD from -0.1% to -0.4%.
The projection previously by the OECD that was issued in May, predicted that unemployment would be 10.8% during 2012 prior to it spiking next year to 11.1%. The chief economist in the OECD said the euro zone was witnessing significant pressure of fragmentation and could be in dangers.
Banks in Europe are being hurt due to the debt crisis across the regions that has pushed yields up on sovereign debt and increasing fears that a country might be forced to leave the monetary union.
The lower OECD projections in the eurozone were more optimistic than a number of forecasts from private sources. However, the organization says the performance will be weaker than what both the International Monetary Fund and the European Commission have said, which both see growth in 2013 of up to 0.2%.
The continents economy that has the most debt is Greece and on Tuesday was given relief as finance ministers in the euro zone agreed to terms with the negotiators of the IMF for another round of money to bail out the country. However, for probably the next 10 years, the amount of debt in Greece will remain above 100% of the country’s GDP.