Nov. 27 - The Organisation for Economic Co-operation and Development has slashed its global growth forecasts, and is warning the euro zone debt crisis is the biggest threat to the world economy. Joanna Partridge reports.
Budget day in Portugal, and few people are happy. Parliament has approved a tough new spending plan for 2013 - which will bring a third year of recession. It's unveiled the biggest tax hikes in the country's modern history - designed to ensure Lisbon can stick to the terms of its international bailout. SOUNDBITE; Raquel Ferreira, Protesting filmmaker, saying (Portuguese): "This budget will threaten our basic rights, including education, health, support for the most vulnerable, and it will violate all of our constitutional principles. Many children in Portugal are going hungry, we are seeing the greatest social decline ever." It's not just the protestors who are questioning the validity of more deep spending cuts. The Organisation for Economic Co-operation and Development also says cost-cutting is choking economies. It's slashed its global growth forecast and warns the euro zone is the biggest threat to the world economy Secretary General Angel Gurria says the debt crisis could last well into 2013. SOUNDBITE: Angel Gurria, OECD Secretary General, saying (English): "Challenges remain to tackle the euro area sovereign debt crisis. Repair the banking system, foster growth and jobs through structural reforms." But if politicians don't find a solution, the OECD is calling on central banks to prepare for more monetary easing. Analysts think it will be some time before the euro zone improves. SOUNDBITE: Richard Hunter, Head of Equities, Hargreaves Lansdown, saying (English): "The likes of Ireland and Portugal have actually been moving in the right direction, but yes indeed Spain and even to some extent France are undergoing a fairly turbulent time. I think it's fair to say it's probably at least 18 months before things are back on an equal footing, and equally of course it's growth that needs to be driven as much as reducing the debt." The OECD is more optimistic about the outlook outside of Europe. It expects 2% growth next year in the US, and for the economy to pick up gradually in Japan, while emerging markets will recover more quickly. The global economy has got worse since the OECD's last forecast in May - both in Europe, and due to the prospect of the fiscal cliff in the U.S. Its latest message is aimed at politicians, as many think recovery lies in their hands.