OECD: ESM needs bigger boost

"Immediate action" is required to increase the eurozone financial firepower, if the "dynamics of runs against solvent sovereigns" are to be stopped and if "future requests for financial assistance" from debt-laden members are to be met, the OECD said in its annual report on the eurozone economy.

In a statement linked to the release of the report Tuesday, the head of the Paris-based organization Angelo Gurria said that "current commitments," limited at 500 billion euros ($664 billion), were not enough to "restore market confidence" in the 17-nation currency area.

"A credible firewall will provide governments with the breathing space they need to focus on revitalizing Europe's economic growth and competitiveness," he added.

The future size of the permanent eurozone rescue fund - also known as the European Stability Mechanism (ESM) – has been fiercely debated among its members, and will finally be decided at a meeting of eurozone finance ministers in Copenhagen, starting Friday.

German resistance

Germany, the bloc's largest economy and biggest contributor to the ESM, signaled Monday that it could agree to a temporary boost of the fund to around 700 billion euros.

However, this is not enough in the view of the OECD, the International Monetary Fund (IMF), as well as the EU commission which all see a need for "vulnerable countries such as Italy and Spain" to regain market confidence.

Gurria said a bigger bailout fund would allow "weak eurozone economies" to focus on "kickstarting growth" with the help of reforms.

"Europe is stalling. It needs to get out of first gear and make growth number one priority," he said

However, main contributors, like Germany, fear that cheap access to ESM funding might ease pressure to reform in debt-wracked eurozone member states.

uhe/gb (AFP, AP, dpa)