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OECD warns of the need for a stronger policy response in the Eurozone

FXStreet (London) - In its annual report on the state of the global economy, the OECD has called for a stronger policy stance to avoid risks to growth, especially in the Eurozone.

“We are far from being on the road to a healthy recovery. There is a growing risk of stagnation in the euro zone that could have impacts worldwide, while Japan has fallen into a technical recession,” OECD Secretary-General Angel Gurria said. “Furthermore, diverging monetary policies could lead to greater financial volatility for emerging economies, many of which have accumulated high levels of debt.”

The Eurozone is projected to grow by 0.8 percent in 2014, with a pickup to a 1.1 percent rate in 2015 and a 1.7 percent rate in 2016.

In its report, the OECD says that prolonged stagnation in the euro area could drag down global growth and have knock-on effects on other economies through trade and financial links. A scenario in the Outlook shows how a negative shock could lead an extended period of very low growth and very low euro inflation, resulting in unemployment remaining at its current unacceptably high level.

“With the Eurozone outlook weak and vulnerable to further bad news, a stronger policy response is needed, particularly to boost demand,” said OECD chief economist Catherine L Mann. “That will mean more action by the European Central Bank and more supportive fiscal policy, so that there

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