OECD calls for $1.3 trillion EU firewall
The 17 countries that use the euro should boost their financial buffers to at least €1 trillion ($1.3 trillion) to help the struggling currency union return to growth, the head of the Organization for Economic Cooperation and Development said Tuesday.
Angel Gurria, the head of the Paris-based international development body, said current commitments to the rescue funds, which are limited to €500 billion, are not enough to restore market confidence in the eurozone.
"A credible firewall will provide governments with the breathing space they need to focus on revitalizing Europe's economic growth and competitiveness," Gurria said in a statement linked to the release of the OECD's annual report on the eurozone economy.
"Decisive action to restore confidence and support demand is needed now."
Gurria's announcement comes just a day after Germany hinted it would support an expanded Eurozone bailout fund, although German chancellor Angela Merkel suggested increasing the fund to €700 billion.
However, Merkel said the increase to the fund should only be a temporary measure until Europe's economy stabilizes.
According to the report, which also spells out a raft of economic reforms for individual countries, vulnerable states may need more than €1 trillion in aid over the coming two years.
Gurria said eurozone finance ministers should take a decision to boost their bailout funds at their meeting in Copenhagen later this week.
But that falls below the recommendation of the International Monetary Fund and the European Commission, the European Union's executive. It may also not be enough to convince other large non-euro economies, such as China and the U.S., to help in the beefing up of Europe's defences by sending more money to the IMF.
International institutions argue that a big and credible bailout fund would restore confidence in vulnerable countries like Italy and Spain and prevent them from actually having to seek help.
Gurria said it could also allow weak economies to focus on kickstarting growth by reforming their economies.
"Europe is stalling," he said. "It needs to get out of first gear and make growth number one priority."
However, countries like Germany fear that easy access to financial support could stop countries from implementing reforms.
With files from CBC News