"The current economic situation is in many ways better than what we have experienced in years," said Jean-Philippe Cotis, chief economist of the Organisation for Economic Cooperation and Development in the group's twice-yearly report on the global economy.

A projected smooth landing of the US economy is balanced by stronger growth in Japan and especially Europe, with emerging markets such as China and India also making sizeable contributions.

"Sustained growth in OECD economies would be underpinned by strong job creation and falling unemployment," Cotis forecast.

He nonetheless pressed officials "to save current tax windfalls," to prevent "in the long run, the repeat of those depressing 'boom-bust' budgetary crises of the past.

In Europe in particular, "we are back in the temptation zone" marked by "a strong rebound in activity and a mountain of fiscal revenues" that came for the most part from business profit taxes, Cotis told a telephone news conference.

He warned that mistaking such revenue as a long-term source would lead to bigger structural deficits when the economic growth cycle came to an end.

Overall economic growth among the 30-member OECD should come to 2.7 percent in both 2007 and 2008 the report estimated, down from 3.2 percent last year.

In its last report, the body had forecast global growth this year of 2.5 percent.

Inflation was tipped at 2.1 percent this year and 2.0 percent in 2008, down from 2.2 percent in 2006 and also slightly less than the previous forecast.

Unemployment was expected to fall from 5.9 percent last year to 5.6 percent in 2007 and 5.5 percent in 2008.

A major potential risk to the upbeat global scenario lies in housing markets, since the share of housing investment in overall growth had reached a 10-year high in half of all OECD countries and appeared set to fall back a bit.

In the United States in particular, "the housing sector has cooled somewhat more than expected," Cotis said, while the report forecast potential turbulence "if problems in the sub-prime mortgage market lead to wider financial-market distress."

At present, financial markets remained generally supportive of growth owing to strong fundamentals and an appetite for risk, the OECD said.

Other growth risks, meanwhile, included high prices for petroleum products and raw materials, though base metal prices were expected to begin declining owing to increased supplies.

The report underscored that "better-than-expected current performance should not be a cause for complacency.

"The apparent slackening in the planned pace of fiscal consolidation in many OECD countries, particularly those where deficit and/or debt levels are high, is a cause for concern."

Turning to monetary policy, Cotis said it "constitutes a challenge for central banks which, on both sides of the Atlantic, should probably err on the side of tightness."

Forecast US inflation of 2.6 percent this year and 2.2 percent in 2008 would argue for not cutting interest rates this year, Cotis said.

"There may even be a case for additional tightening in the United Kingdom, should inflationary pressures persist, and more clearly so in the euro area, where core inflation has essentially reached the 2.0 percent mark, while activity is set to continue to expand vigorously."

The euro's current strength, he said later, "only reflects the strength of the European economy," and had not prevented Germany from boosting exports of manufactured goods.

New French President Nicolas Sarkozy and some industrialists maintain that the strong euro unduly favors competition from abroad and have repeatedly urged the European Central Bank to ease monetary conditions in the eurozone.