PARIS, May 29 (Reuters) – Recession is unlikely in the euro zone and a "welcome" drop in the value of the euro should help offset the toll that debt-shrinking austerity measures take on economic growth, the OECD's chief economist said.

Pier Carlo Padoan argued in an interview with Reuters that governments need to step up fiscal consolidation, combine that with growth-increasing reforms of pension systems, labor and other markets, and show they are working in unison to convince sceptical financial markets that their strategy is credible.

Even if austerity hits growth, it would be partly offset by Asian-led demand for euro zone exports, made more competitive by the drop in the euro's exchange rate, he said.

The euro exchange rate versus the dollar has fallen in the region of 14 percent this year, while its trade-weighted value has slipped more thna 10 percent, according to a measure the European Central Bank watches closely .

The Paris-based Organization for Economic Cooperation and Development (OECD) on Wednesday issued new forecasts predicting a post-recession recovery led by China and other emerging markets.

It forecast 1.2 percent growth in 2010 and 1.8 percent a year later in the 16-country euro zone, more than the 0.9 and 1.7 percent it forecast in November 2009, but less than projected for the US, Japanese and British economies.

For key November 2009 forecasts, click on and for same table from May 26, 2010, click

''Is there going to be a double-dip (recession) in Europe? I don't think so,'' said Padoan, who said massive debts following the 2007-09 global recession were ''not just a European story'', but one that Europe was about to tackle faster than others.

''European growth is already slow. Unless there's another recession, which I would rule out, it's going to be a little less of a small amount,'' Padoan said.

Asked if debt restructuring would ultimately be needed in Greece, the first country in the 11 years of the euro to need a financial bailout, Padoan said governments would do well to consider a general mechanism that allows for orderly debt workouts among other institutional reforms that it is now starting to consider.