The euro zone came under new pressure to boost the firepower of its debt emergency fund, with the OECD pressing for a safety net of up to €1 trillion
"The European firewalls should be expanded further and made more credible to restore confidence," the OECD said.
"To ease market tensions, the funds should be available on a scale sufficient to withstand possible future requests for financial assistance," the Paris-based economic forum said.
EU finance ministers are meeting this weekend in Copenhagen.
The OECD said the refinancing needs of vulnerable euro zone nations could top €1 trillion over the coming two years and in addition contributions may be necessary to recapitalise banks.
"Although it is unclear that funds on this scale would ever need to be drawn down, the availability of credible firewalls may enhance confidence," the report said. "Ultimately, the scale and form of funds needed will depend on how confidence returns, as well as economic and financial developments," it added.
OECD Secretary General Angel Gurria, warning that the current commitments to the fund were not enough to restore market confidence, said a "credible" firewall would give governments "breathing space" to focus on reviving growth.
"Make it large, make it prominent," Gurria told a news conference in Brussels alongside European Economic Affairs Commissioner Olli Rhen. "We are not out of the woods," Gurria said, referring to the debt crisis that has festered for more than two years.
The OECD's call has little chance of being heard, however, with Germany backing a smaller increase after months of international pressure to back a bigger fund.
Euro zone governments have debated whether to combine the lending capacity of the temporary European Financial Stability Facility (EFSF), used to rescue Portugal, Ireland and Greece, with the permanent European Stability Mechanism (ESM).
German Chancellor Angela Merkel said yesterday that Berlin was now open to combining €500 billion from the ESM with some €200m already promised to debt-ridden countries within the EFSF.
This option would give the euro zone around €700 billion on paper, but in reality it would have a lending capacity of €500 billion since the rest is already committed to Greece, Ireland and Portugal.
The European Commission has proposed other options, including one that would give the euro zone a rescue fund totalling €940 billion. This option, however, is unlikely to be agreed.
The OECD said that "increasing the firewalls must be balanced against the impact it has on the public finances of the countries providing fiscal support to the arrangements."
Luxembourg Prime Minister Jean-Claude Juncker, who heads the Eurogroup of finance ministers, said at a debate on the crisis in Brussels that there was "no doubt that we have to increase the firewalls."
He refused to say which option he backed but added: "For me it is obvious that we would understimate the current crisis and remaining consequences of that crisis if we would not be prepared to increase the firewall."
Juncker also said today that there were good reasons to cut Ireland's debt servicing burden. "There are good reasons for easing the burden on Ireland as far as the debt service is concerned," Juncker said.
Meanwhile, the EU's top economic official said today that euro zone finance ministers will find a compromise on the size of the bloc's bailout fund for indebted countries at a meeting later this week.
However, EU Economic and Monetary Affairs Commissioner Olli Rehn declined to be drawn on details.
"We have already taken significant decisive steps towards a stronger and permanent firewall to contain contagion and calm down market instability if it arises," Commissioner Rehn told a news conference.
"Further reinforcement will be decided on Friday, which will help us remove any remaining doubts. I am confident we can reach a confidence-building compromise," Rehn said.The euro zone will have to increase the size of its protective firewalls, the president of the Eurogroup said today.
"There is no doubt we have to increase the firewalls," Jean-Claude Juncker told a seminar at the European Parliament.
He was speaking about the possibility of strengthening the firepower of the European Stability Mechanism and European Financial Stability Facility bailout funds.
Juncker, who chairs regular meetings of euro zone finance ministers, also said there were good reasons to cut Ireland's debt servicing burden.
"There are good reasons for easing the burden on Ireland as far as the debt service is concerned," Juncker said.
Meanwhile, the EU's top economic official said today that euro zone finance ministers will find a compromise on the size of the bloc's bailout fund for indebted countries at a meeting later this week.
However, EU Economic and Monetary Affairs Commissioner Olli Rehn declined to be drawn on details.
"We have already taken significant decisive steps towards a stronger and permanent firewall to contain contagion and calm down market instability if it arises," Commissioner Rehn told a news conference.
"Further reinforcement will be decided on Friday, which will help us remove any remaining doubts. I am confident we can reach a confidence-building compromise," Rehn said.
Finance ministers meet on Friday in Copenhagen where they are expected to agree on the design and the combined size of the bloc's rescue funds.
