MercoPress. South Atlantic News Agency

Europe accepts austerity must be less austere amid concerns over stagnant growth

Barroso: the decision was made on purely economic and financial grounds, rather than for political reasons.

The European Commission has said it will allow some EU member states to slow their pace of austerity cuts, amid concerns over growth. France, Spain, Poland, Portugal, the Netherlands and Slovenia are all being given more time to complete their austerity plans.

France will get two more years to bring its budget deficit below 3% of GDP. Commission president Jose Manuel Barroso said the extra time must be “used wisely” to lift competitiveness. The measures came as part of the European Commission's country-specific recommendations.

Spain, Poland and Slovenia will also get two more years to bring down their budget deficits though spending cuts and tax increases. The Netherlands and Portugal are having their timetables extended by one year.

Even Europe's stronger economies, including Germany, are being urged to allow wage increases and increase flexibility in the jobs market to improve competitiveness.

With regard to the UK, the EC report includes recommendations for action on the housing supply and rental market, more affordable and better quality childcare, and improving youth training. It also says that there is not enough transport spending.

Europe remains broadly in recession. The 17-member Euro zone shrank by 0.2% in the first three months of the year, and is expected to register negative growth for 2013 as a whole.

There has been concern that the focus on fiscal consolidation in many EU states has worsened the economic situation. Earlier, the OECD called on the European Central Bank to do more to boost growth.

This month, the central bank in Frankfurt cut interest rates to a record low of 0.5% and said it was “ready to act if needed”.

In an official statement, the Commission said the extra time should be used to enact reforms.

“Giving more time for certain member states to meet their agreed objectives is designed to enable them to accelerate efforts to put their public finances into order and carry out overdue reforms,” it said.

“Reform efforts must be stepped up to credibly produce the required outcomes within the new deadlines and excessive deficits must be corrected.”

Mr Barroso stressed that the decision to allow some member states to slow the pace of austerity was made on purely economic and financial grounds, rather than for political reasons. Speaking about the new timetable for France, he said the message remained “very demanding”.

“The extra time should be used wisely to address France's failing competitiveness ... I believe there is a growing consensus now in France about the need for those reforms,” he said.

Figures released earlier this month showed that France had entered its second recession in four years after the economy shrank by 0.2% in the first three months of 2013.