Europe’s debt crisis is pushing the 17-country euro-zone towards recession and dragging down the global economy, the Organisation for Economic Cooperation and Development said Thursday.

Even growth in traditional economic powerhouse Germany is slowing, and the OECD’s interim assessment said that Europe’s largest economy could slip into recession by the end of the year.

Still, OECD Chief economist Pier Carlo Padoan said that he was “encouraged” by recent progress in Europe to get a handle on the crisis.

In May, the OECD which monitors economic trends for the world’s most developed economies said that the 17—country eurozone could contract by as much as 2 percent this year. Thursday’s assessment didn’t offer a comparable prediction, and Padoan wouldn’t say if he thought such a severe contraction was likely.

Instead, the report says a recession is “taking hold” in the eurozone and predicts the three largest economies that use the euro Germany, France and Italy will shrink by 0.2 percent this year.

For Germany, it predicted an annualized contraction of 0.5 percent in the third quarter and of 0.8 percent in the fourth.

According to the statistics agency Eurostat, the eurozone economy shrank 0.2 percent in the second quarter of the year after growth was flat in the first quarter. A recession is defined as two consecutive quarters of negative growth.

The interim report said it expects the U.S. to grow 2.3 percent this year, just off its May prediction of 2.4 percent.

Padoan warned that significant uncertainty marks the organization’s predictions and that the global economy faces several risks that could further drag down growth.

The largest is the European response to its debt crisis, which is most responsible for the poor outlook. But Padoan also cited the so-called “fiscal cliff” in the U.S., a reference to the end of the year when a series of tax increases and spending cuts takes effect.

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