The Eurozone crisis is now the greatest threat to the world economy.
That is according to the international think-tank the Organisation for Economic Cooperation and Development (OECD) who today slashed thier global growth forecasts.
It says that while marked progress has been made in resolving the Irish financial and banking crises economic growth is projected to remain low, but positive, during the next 2 years.
It adds that the weak European economy which accounts for a majority of Irish exports by destination will make it difficult to offset the drag from "on-going fiscal consolidation, household deleveraging, low credit availability and subdued sentiment".
It believes this weak growth will make it unlikely that unemployment will decline substantially from its current high levels but that inflation should stay low.
The group says that the government here should continue to implement its medium-term fiscal plan and stop the rise of public debt.
It adds that a European retroactive recapitalisation of Irish banks would ease the burden of repaying bank-support-related.
Global outlook
The Paris-based body has forecast that the global economy would grow 2.9% this year and expand 3.4% in the next.
This marks a sharp downgrade since its last estimate in May of 3.4% for 2012 and 4.2% the following year.
It believes the global economy will make 'a hesitant and uneven recovery' over the coming 2 years.
It says decisive policy action is needed to ensure that stalemate over fiscal policy in the United States and continuing Euroarea instability do not plunge the world back into recession.
OECD Secretary-General is Angel Gurría.
"The world economy is far from being out of the woods" he said.
"The US 'fiscal cliff', if it materialises, could tip an already weak economy into recession, while failure to solve the Euro area crisis could lead to a major financial shock and global downturn".
"Governments must act decisively, using all the tools at their disposal to turn confidence around and boost growth and jobs, in the United States, in Europe, and elsewhere" he added.
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