The global economic downturn has affected the eurozone to a greater degree that originally expected, according to the Organisation for Economic Co-Operation and Development's (OECD) biannual report published this morning.
Despite earlier expectations that the global downturn would affect Europe only marginally, GDP growth in the European Union weakened considerably during 2001.
Export growth contracted and business investment has stopped increasing - resulting in sluggish trade led by a reduced demand for capital goods that was aggravated by the attacks of September 11th, the report says.
On the budgetary side, many governments face widening deficits in 2001 and 2002 due to weakening budgetary revenue.
In a warning against the effects of unemployment on international trade, the OECD said it was important in high unemployment countries to reduce rigidities, encourage labour supply, lower structural unemployment and improve the entrepreneurial climate.
But the report says further state subsidies aimed at boosting economies should be avoided as they would be difficult to phase out and would add to the risks to long-term growth.