Euro area recovering, but major reforms needed: OECD

The Organisation for Economic Cooperation and Development (OECD) in its latest report Economic Survey of the Euro Area said that fiscal consolidation is necessary, although it may drag on growth in the short term.

''Countries need a full set of measures to bring national debt down to more sustainable levels, and changing or dismissing part of a loan should be part of a broader toolkit that is used when other measures are not enough'', OECD Chief Economist Pier Carlo Padoan said, adding that the crisis that gripped the eurozone requires ''detailed and credible multi-year plans.''

To put the euro area on a more robust footing, the paris-based group recommended that governments should improve fiscal discipline through reform of euro area budget rules and the creation of national fiscal councils; upgrade financial regulation; and implement comprehensive labour and product reforms to boost growth and competitiveness.

''The European Central Bank (ECB) should unwind its monetary stimulus measures as soon as ''upward risks'' to price stability emerge, the think-tank said.

It is now forecasting growth across the eurozone at 1.7 per cent this year and the next, before rising to 2 per cent in 2012.

Padoan backed the idea of a eurobond – issuing debt backed by all the euro nations.