Euro zone ‘lagging behind in shaky G7 recovery’

Euro zone nations are falling far behind the United States and Canada as a fragile recovery takes root in advanced economies, the OECD said on Thursday, advising central banks to keep easy money flowing so the rebound does not prove short-lived.The Paris-based Organisation for Economic Cooperation and Development forecast that the Group of Seven advanced economies were on course for average annualised growth of 1.9 percent in both the first and second quarters although rates varied widely.An improving U.S. labour market would help the world’s biggest economy grow 2.9 percent in the first quarter on the same basis, and 2.8 percent in the second quarter, the OECD said.Its latest predictions were contained in a brief report in which it gives quarterly estimates for a handful of countries ahead of a fuller publication in May. The report was broadly more optimistic than a previous one.As unemployment fell in the United States, confidence was firming, particularly among households, while easy financial conditions were helping them rebuild their strained budgets, the OECD said.“Monetary policy needs to be supportive in the medium term to allow this process to continue,” OECD chief economist Pier Carlo Padoan told journalists.With the euro zone creeping out of a sovereign debt crisis, the recovery would be weakest there, with the economies of France and Italy in contraction in the first quarter and Germany eking out growth of only 0.1 percent.Grappling with weak industrial production and fragile household confidence, Italy would be mired in recession as its economy contracted an annualised 1.6 percent in the first quarter and 0.1 percent in the second quarter, the organisation estimated.