UN WARNS OF RENEWED THREAT OF RECESSION IN PARTS OF EUROPE

Berlin, January 19- The United Nations warned Tuesday of a renewed threat of recession in parts of Europe as result of the austerity moves launched across the region.

In its annual report on the world economy the UN said "the impact of fiscal austerity planned or underway risks a renewed economic downturn (in Europe)”.

The UN went on to predict that unemployment would remain high across Western Europe amid slowing economic growth.

It forecast that growth in the 17-member eurozone economy will ease to 1.3 per cent this year after the currency bloc expanded by 1.6 per cent in 2010.

In particular, the UN said that three of the currency bloc's most heavily indebted nations -Greece, Ireland and Portugal- should expect a sharp economic contraction in the coming 12 months as they battle to knock their state finances into shape.

"Countries entrenched in fiscal crises, such as Greece, Ireland, Portugal and Spain will either remain in recession or see minimal recovery at best," the UN wrote in its report.

But the UN also noted the economic divergence that has taken shape across the eurozone as a result of the region's debt crisis, which has now entered its second year.

This includes unemployment where the jobless rate ranges from 20 per cent in Spain to 6.7 per cent in the eurozone's biggest economy, Germany.

But the UN report says it will take years for employment to rebound significantly in the region, as the growth outlook is not sufficiently strong and, in some cases, structural problems will act a hindrance to job creation.

After rebounding last year on the back of strong export demand, most Central European economies also face a fragile recovery, the UN warns.

"The space for stronger counter-cyclical measures which could speed up recovery is limited," it said. "Budget deficits are large, especially in the economies most affected by the global crisis.

"Growth is expected to strengthen to 3.2 per cent in 2011," the UN report said about the European Union's new Central European member states.

"Yet, it will take some time before pre-crisis growth rates will be achieved again and the fiscal austerity likely will not be of immediate help in that sense," the report said.

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