The 16-member eurozone has pulled out of the recession - ahead of many analysts' predictions - and Asia is leading the recovery, the Organization for Economic Cooperation and Development (OECD) said on Thursday. However, the Paris-based watchdog, comprised of 30 of the world's richest nations, also warned that the recovery will be slow as governments face huge debt and high unemployment.

"We are looking at a scenario where disaster has been avoided but we're still looking at a scenario which involves slow growth and high unemployment," the OECD's chief economist, Jorgen Elmeskov, told Reuters television in an interview.

The eurozone lifted from recession in the third quarter with growth of 0.4 percent compared to the previous three months. But compared to the same quarter in 2008, momentum fell by 4.1 percent, according to European Union figures.

"The sharp contraction in euro area activity appears to have ended sooner than anticipated … However, headwinds from financial sector deleveraging and rising unemployment suggest that the recovery will be gradual," the OECD said.

Rising unemployment

According to the OECD, eurozone unemployment will continue to grow, and will peak in 2011, with unemployment rate forecasts at 9.4 percent for 2009, 10.6 percent for 2010, and 10.8 percent for 2011.

Similar numbers are predicted for the US, with joblessness falling to just below 10 percent in the third quarter of next year and then staying at 9 percent or higher until the end of 2011.

"It is only sometime down the line that the recovery will become sufficiently strong to reduce unemployment," the OECD said.

While it reports an improvement in financial conditions, the OECD still has doubts about the health of the European banking sector.

By the end of 2010, the OECD is calling on governments to begin withdrawing government stimulus measures, so as to "avoid igniting asset or general price inflation."

Asia leads the way

The organization also said that the economic upturn in non-OECD countries, "especially in Asia and particularly in China, is now a well-established source of strength" for the relatively weaker recovery among OECD member nations.

"Vigorous growth has resumed in China thanks to a very large monetary and fiscal stimulus," it said.

On his tour of Asia, US President Obama emphasized the need to control debt levels during the recovery period.

He said it was important to recognize "that if we keep on adding to the debt, even in the midst of this recovery, that at some point people could lose confidence in the US economy in a way that could actually lead to a double-dip recession."

vj/dpa/AFP/AP/Reuters
Editor: Trinity Hartman