The Organization for Economic Cooperation and Development (OECD) has said Europe's debt crisis is pushing the 17-country Eurozone towards recession and dragging down the global economy.
Even growth in traditional economic powerhouse Germany is slowing, and OECD's interim assessment said that Europe's largest economy could slip into recession by the end of the year.
"The negative elements of the global economy ... stemming mostly from Europe are there and they are somewhat stronger than they used to be a few months ago," OECD Chief Economist Pier Carlo Padoan said.
He said the good news was that the global economy was not in recession, but that avoiding one would depend on what politicians do in the coming months and pushed especially for more action by the European Central Bank (ECB).
ECB could outline later in the day a plan to buy up the bonds of governments struggling with high borrowing costs.
Padoan said he was encouraged by recent progress in Europe to get a handle on the crisis.
High borrowing rates are at the heart of the European crisis and have forced several countries to seek bailout loans. Now, larger economies, like Italy and Spain, are suffering high rates. Many experts worry that Europe can't afford to rescue them but also can't afford to let them fail.
Padoan also dismissed concerns - mostly coming from Germany - that ECB intervention could push up inflation. He said it wasn't clear that bond-buying would increase inflation and that, at any rate, Europe needed more inflation.
In May, OECD - which monitors economic trends for the world's most developed economies - said the 17-country Eurozone could contract by as much as 2 per cent this year. Thursday's assessment didn't offer a comparable prediction, and Padoan wouldn't say if he thought such a severe contraction was likely.
Instead, the report says a recession is "taking hold" in the Eurozone and predicts the three largest economies that use the euro - Germany, France and Italy - will shrink by 0.2 per cent this year.
For Germany, it predicted an annualized contraction of 0.5 per cent in the third quarter and of 0.8 per cent in the fourth.
According to the statistics agency Eurostat, the Eurozone economy shrank 0.2 per cent in the second quarter of the year after growth was flat in the first quarter. A recession is defined as two consecutive quarters of negative growth.
The interim report said it expects the US to grow 2.3 per cent this year, just off its May prediction of 2.4 per cent.
Padoan warned that significant uncertainty marks the organization's predictions and that the global economy faces several risks that could further drag down growth.
The largest is the European response to its debt crisis, which is most responsible for the poor outlook. But Padoan also cited the so-called "fiscal cliff" in the US, a reference to the end of the year when a series of tax increases and spending cuts takes effect.