Global stock markets jumped on Wednesday following a string of heavy losses as the OECD raised its forecasts for world economic growth but also warned of "significant" risks to the recovery.
European governments meanwhile sought to drive down massive debt and reassure increasingly nervous financial market investors by adopting tough austerity measures, including public sector pay cuts and increased taxes.
"Growth is picking up in the OECD area -- at different speeds across regions -- and at a faster pace than expected in the previous Economic Outlook," the Organisation for Economic Cooperation and Developmentsaid in a report.
But the group of leading economies also warned that "risks to the global recovery could be higher now, given the speed and magnitude of capital inflows in emerging-market economies and instability insovereign debt markets."
Global financial markets have been racked in recent weeks by concern over the debt crisis in the eurozone and the possibility of overheating and asset bubbles emerging in major emerging markets such as Chinaand India.
On Wednesday, however, equities looked in good shape as investors hunted for bargains after sharp plunges earlier in the week on the back of fears that the drive to bring down debt in some countries could hit economic growth.
Tokyo's Nikkei ended 0.66 percent higher, while Hong Kong rose 1.11 percent.
In Europe, Frankfurt jumped 2.28 percent, London rocketed up 2.61 percent and Paris shot up 2.99 percent in afternoon trading.
On Wall Street, the Dow Jones Industrial Average gained 0.84 percent and the tech-heavy Nasdaq index rose by 1.40 percent in morning trading.
Derek Halpenny, head of global currency research at the Bank of Tokyo-Mitsubishi UFJ, warned however that "the markets remain jittery and it would take very little to prompt renewed signs of risk aversion."
The OECD, whose 30 members include Germany and the United States but not China and India, stressed in its report that governments should start winding up their stimulus programmes and enacting fiscal consolidation.
It said the US government's fiscal policies were "unsustainable" and called on Japan to develop a "credible" plan to scale back spending.
It said too that while Britain's economic recovery was gaining traction, the country's record public deficit remained a problem that must be tackled.
At the same time, the organisation raised its forecast for real or inflation adjusted gross domestic product (GDP) growth in the world economy to 4.6 percent from an earlier prediction of 3.4 percent made in November 2009.
But it said that much of the growth would come from emerging economies, with eurozone output expanding by just 1.2 percent this year.
"Difficulties in restoring competitiveness and sound public finances in some peripheral countries may complicate recovery" in the euro area, the OECD said.
The report came after Italy on Tuesday approved austerity measures worth 24 billion euros (30 billion dollars) for 2011-2012 -- the latest euro nation to implement drastic cuts in response to a crisis in confidence on the markets.
Meanwhile the French government's plans to raise the retirement age from 60 as part of its cost-cutting efforts sparked furore, with the main trade unions calling for a national strike on Thursday.
The reduction of the minimum age for workers to receive a full state pension from 65 to 60 was in 1984 one of the key reforms of Socialist president Francois Mitterrand and remains cherished by the left.
Also on Wednesday, the European Commission unveiled plans for a new Europe-wide crisis insurance levy from banks in response to widespread public anger at the amount of taxpayer money used to prop up the banking system.
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