PARIS (AFP) -- The ECB should cut interest rates further and the EU take bloc-wide measures to boost growth and ease the fiscal adjustment in the eurozone where crisis risks are intensifying, the OECD said on Tuesday.
The OECD called for “a further easing in the euro area” despite the ECB having official rates at a record low 1.0 percent, given that inflation is set to decline to the central bank’s target of 1.9 percent next year.
It warned that the ECB may need to intervene again to stabilize banks and government bond markets.
With EU leaders meeting Wednesday in Brussels to contemplate measures to boost growth, the OECD said “credibility and confidence would be enhanced by euro area and EU-wide measures.”
While credible medium-term plans to reduce deficits were essential, the OECD said “the speed of consolidation should depend on country-specific circumstances.”
New French President Francois Hollande has called for a growth pact to complement the EU fiscal pact, pitting him against German Chancellor Angela Merkel who has pushed for euro nations to pursue austerity policies.
The OECD said growth in Germany was not enough to carry along the rest of the eurozone, and said higher wages in the country could boost domestic demand and contribute to a less painful readjustment for others.
“EU-wide measures would strengthen activity, both directly and indirectly, by boosting confidence and making it easier to achieve the intra euro area rebalancing effort,” it said.
