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BRUSSELS - Failure to appreciate the scale of Europe's banking crisis led to the most significant economic forecasting errors since the oil crisis in the 1970s, the Organisation for Economic Co-operation and Development has said.

The admissions were contained in a 'post-mortem' report on the eurozone crisis published by the Paris-based think tank on Tuesday (11 February),

“The repeated deepening of the euro area sovereign debt crisis took us by surprise, because of the stronger-than-expected feedback between banking and sovereign weaknesses," OECD Chief Economist Pier Carlo Padoan said at an event launching the paper in London.

“We have learned a lot from the crisis,” he added.

The organisation’s economic projections repeatedly under-predicted the extent of the collapse in activity during the 2008-09 financial crisis and then over-estimated the pace of recovery in the following years. The eurozone fell into a double-dip recession in 2011-12 before returning to anaemic growth of 0.2 percent in 2013.

”We have taken steps to improve short-term forecasting models, construct better indicators of financial conditions and explore the risks around our forecasts more systematically,” Padoan said.

He added that the belief that the eurozone's debt crisis would gradually play itself out was the biggest mistake made by analysts.

“It was the repeated assumption that the euro crisis would dissipate over time, and that sovereign bond yield differentials would narrow, that turned out to have been the most important source of error.”

But the OECD is not the first to face the charge that it underestimated the scale of the crisis.

Accusations of poor and over-optimistic forecasting have also been laid at the door of the European Commission and the International Monetary Fund, particularly in respect of Greece's bailout.

Greece has experienced one of the deepest peacetime recessions to hit an advanced economy. The country's output has reduced by more than 25 percent in the past six years. Meanwhile, unemployment has soared to 27 percent with youth joblessness hovering over 60 percent. But the OECD report says that although it failed to forecast the scale of the downward impact austerity policies would have on economic growth in Greece, this was less of a factor in the rest of the eurozone.