PARIS (AFP) -The weak eurozone economy poses a key threat to global growth, the OECD warned Tuesday, urging more flexibility in fiscal rules for struggling EU members like France and Italy to prevent another recession.
Forcing the two major European economies to meet the EU’s tough deficit criteria “would likely depress activity further and even risk tipping the euro area into another recession,” it said.
France and Italy’s “slower pace of structural fiscal adjustment… proposed in their 2015 budget plans seems appropriate,” said the Organisation for Economic Cooperation and Development, which provides economic analysis and advice to its 34 industrialised members.
Its assessment came as the European Commission is due to deliver its verdict of member states’ budgets this week, with France and Italy under fire after having submitted figures that fall short of the EU’s criteria.
Tensions have been running particularly high between Berlin, which has preached fiscal discipline, and Paris, which is running not only running a budget deficit but also urging more stimulus spending.
France is set for a deficit of 4.3 per cent of GDP in 2015, way above the EU ceiling of three per cent, while Italy’s slow pace of structural reforms to reduce its massive debt of 133.4 per cent – more than double the EU ceiling – was under scrutiny.
But the OECD appeared to side with Paris and Rome, urging the eurozone to “slow down structural budget consolidation relative to previous plans to reduce the drag on growth”.