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Slashing Eurozone austerity could boost growth: report

CUTTING back on austerity across the eurozone would boost growth by 1% next year, consultants Ernst & Young has forecast.

In its summer outlook, the company said the recession across the 17-member bloc will last longer than previously thought.

It said that if the austerity measures currently planned were halved, eurozone GDP would increase by 1% next year.

Marie Diron, senior economic adviser to the Ernst & Young Eurozone Forecast, said that in the short term there is little that can help growth across the countries that have the euro.

"The structural reforms being implemented could take some time to have an impact on GDP," she said. "On the positive side, the relaxation of fiscal austerity means measures that would have otherwise been implemented that could have potentially harmed growth have been avoided. But fiscal policy will remain restrictive."

Ernst & Young said the European Central Bank can do more by easing monetary policy targeted at SMEs. It also said that the delay in the recovery in the eurozone was partly due to the slowing down in emerging markets such as China and Brazil.

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