Europe's debt crisis 'will not spread'

Europe's debt crisis will be limited to Greece, Portugal and Ireland and won't spread to other parts of the continent, Angel Gurria, secretary-general of the Organisation for Economic Co-operation and Development (OECD) said.

"There are three countries - one is Greece which has a fiscal problem, second is Ireland which has a banking problem and third is Portugal," Mr Gurria told reporters in New Delhi today. "I do not see that there are other countries that are going to join the number that are requesting help from European Union and the IMF."

More than a year after the European Union approved a €110 billion bailout for Greece, ministers are planning a second package to stave off the euro area's first sovereign default. Mr Gurria said the EU was working on a fund to help governments, and were putting in place measures to prevent such a crisis.

"Europeans are creating a €500 billion safety net," he said. "They are now honing the mechanism to make them more efficient. They are also going to have IMF support with about half of that, if need be."

Growth in China, the world's second-largest economy, will be about 9 per cent in 2011, less than the 10 per cent pace predicted in November, according to the OECD.  "We should receive reduction in rate of growth of China as good news, because if there is pressure on prices, that means eventually it is going to stop," Mr Gurria said.

China has raised interest rates four times since October to curb consumer prices that climbed more than 5 per cent in April for a second month. Premier Wen Jiabao aims to tame inflation that is spreading beyond food to other goods.

China's lending tumbled in May and money supply grew at the slowest pace since 2008, adding to signs that the world's second-biggest economy is cooling.

Bloomberg