WASHINGTON (AP) - The International Monetary Fund says a recession in Europe will slow the global economy this year and is urging world leaders to take steps that encourage growth rather than slash budgets.

The IMF forecasts global growth of 3.25 percent this year, slower than the 4 percent pace it projected in September. The 17 nations that share the euro will shrink 0.5 percent this year. In September, the IMF had predicted 1.1 percent growth for the region.

Europe's recession should have only a modest impact on the United States. The IMF projects 1.8 percent growth for the year, unchanged from its September estimate.

The IMF warns that steep budget cuts will slow growth and undermine market confidence. The message runs counter to the push for budget cuts advocated by Germany.

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