The European Commission on Wednesday gave major economies France and Spain extra time to trim their deficits as it laid down economic targets for EU nations that desperately need growth and jobs in the fallout from the debt crisis.
The crisis has seen Brussels gain additional powers to ensure EU member states toe the line to avoid future trouble -- just as well, when 20 of the 27 have been put under surveillance for breaching the bloc's public deficit and debt rules, respectively at three percent and 60 percent of gross domestic product (GDP).
Topping the problem list, France, the EU's second-largest economy struggling in recession, will have to step up the pace of reforms, including of its costly pension system, if it is to get back on track, the Commission said.
Spain, the Netherlands, Poland, Portugal and Slovenia should all be given extra time to cut their deficits, the Commission said, while recommending that Malta be placed under scrutiny and sharply criticising Belgium for failing to do enough to trim its deficit.
In France, measures should be taken "by the end of this year to reform the pension system and ensure it is in equilibrium by not later than 2020," the Commission said.
As an ageing population adds to the pressure, the French government will have to adjust pension payments, the retirement age -- already on the rise -- and generally reduce the system's overall costs, all at the same time as not increasing the burden on employers.
Given an additional two years to put its fiscal house in order, such pension and labour market reforms must get France from an expected budget deficit of 3.9 percent this year to 3.6 percent in 2014 and 2.8 percent in 2015, it said.
Current estimates put the deficit -- the shortfall between government revenue and spending -- at 3.9 percent this year and 4.2 percent next, with the economy set to shrink 0.1 percent in 2013.
In the face of the debt crisis, EU governments opted initially for tough austerity measures but soaring unemployment and popular unease have switched the emphasis to growth now, rather than stabilising the public finances.
For the Commission, this means a delicate balancing act between prudence and enforcing budget rules under its "Excessive Deficit Procedure" (EDP), while allowing governments the leeway they need to get their economies moving again.
Spain, which narrowly avoided a full-scale debt bailout last year, was given two extra years to bring its budget deficit into line at 2.8 percent of GDP by 2016.
The Netherlands got an extra year to 2014 and bailed-out Portugal one year to 2015, while Slovenia, beset by worries its stricken banks will also force it into a rescue, got two years to 2015.
Poland was granted two years to 2014.
In return, all these countries must commit to a series of general and specific reforms to improve economic efficiency and stabilise government finances, or face stiff fines.
In the case of Belgium, the Commission said the country had to take additional measures to hit a 2.7 percent deficit target for this year.
On the other side, the Commission said Italy, along with Latvia, Hungary, Lithuania and Romania, have done enough to bring their budgets into line and so should be dropped from the poorly-marked nations on the EDP list.
Putting a country under the EDP gives Brussels added oversight of its economic policies, allowing it to make specific recommendations as to what it should do and with sanctions available to ensure that they are implemented.
Italy is forecast to reduce its public deficit to 2.9 percent of GDP this year and 2.4 percent in 2014.
However, Italy still has a massive accumulated debt ratio of 130 percent of GDP and must also account for how it plans to finance 10 billion euros ($13 billion) of new spending recently announced by new Prime Minister Enrico Letta.
The Commission said it added Malta to the EDP, leaving the list at 16 countries.
EU leaders are expected to discuss the Commission's recommendations at a summit at the end of June before they are formally approved later by finance ministers of the 27 EU member countries.
The call for reform comes as the OECD warned in its semi-annual outlook Wednesday that "protracted weakness" in the crisis-hit eurozone "could evolve into stagnation with negative implications for the global economy."