The Organization for Economic Cooperation and Development said Europe's debt crisis risks spiraling and seriously damaging the world economy.

“The risk is increasing of a vicious circle, involving high and rising sovereign indebtedness, weak banking systems, excessive fiscal consolidation and lower growth,” OECD Chief Economist Pier Carlo Padoan wrote in the organization's semi-annual report on the global economy. Such a downside scenario “may materialize and spill over outside the euro area with very serious consequences for the global economy,” he said.

The remarks amount to a warning to European Union leaders who are preparing to gather in Brussels tomorrow to discuss how to revive growth and grapple with a political impasse in Greece, where voters rejected austerity measures in elections on May 6. The euro has dropped more than 3 percent this month on concern that Greece may opt to leave the 17-nation monetary union.