The Organization for Economic Cooperation and Development (OECD) released the semi-annual global economic outlook today, which reflected growing fears that the currency union could not survive, while global growth has faltered due to the expanding debt crisis in Europe, which is currently considered the main downside risk to the global economy.

The OECD 34-nation will grow 1.9% and 1.6% this year and the next, revised lower from 2.3% and 2.8% as projected in May respectively, according to the report.

The OECD said the euro-area crisis represents the key risk to the world economy, and added that the contagion has entered a new phase and spread beyond euro-area countries normally seen as fiscally vulnerable, suggesting that fiscal concerns are no longer the only driving force behind contagion.

The OECD said the European Central Bank (ECB) should cut rates and expand the balance sheet, in attempts to play a larger role in fighting the debt crisis. European leaders also need to boost the firepower of the European Financial Stability Facility (EFSF) also, OECD said.

OECD Chief Economist Pier Carlo Padoan wrote in the report that decisive policies and the appropriate institutional responses will have to be put in place to ensure smooth financing at reasonable interest rates for sovereigns. He added this calls for rapid, credible and substantial increases in the capacity of the EFSF together with or including greater use of the ECB balance sheet.

OECD expects the euro-area region to grow 1.6% this year and only a 0.2% in 2012, while in 2013 the region could expand by 1.4%. The euro-area region is falling behind and could go through a mild recession as the OECD projects the euro zone to contract by 0.1% this quarter and 0.4% in the first quarter of the coming year.

Italy faces deteriorating confidence, weak export-market growth and difficult financial conditions, the Paris-based OECD said today. Further measures will be required to keep the fiscal adjustment program on track.

The Italian economy will grow 0.7% this year before contracting 0.5% in 2012, down from 1.1% and 1.6% as expected in May.