Because low or negative growth reduces the amount of money governments receive in taxes, stagnation also threatens to throw countries off their deficit targets. According to the report, both Greece and Spain won’t meet their goal of reducing their deficits to 3 percent by 2014. It predicts Greece’s will be 4.5 percent at that point and Spain’s 6.4 percent.
In Greece’s case, that could mean jeopardizing the rescue loans it is using to fund itself. Greece has asked its international creditors for more time to reach its goal. Rehn said Wednesday that the country’s debt levels look increasingly unsustainable and that something must be done, but he stopped short of saying what.
David McHugh in Frankfurt contributed to this report.