The eurozone as a whole needed to loosen its fiscal policy next year to make it moderately expansionary to boost the sluggish economic recovery, the European Commission said yesterday.

“The Commission considers that there is a case for a significantly more positive fiscal stance for the euro area,” it said in a statement.

The Commission said the stance was to support the already ultra loose monetary policy of the European Central Bank.

“While there has been significant progress in recent years in the euro area, the recovery is still not accelerating, there is still significant unused capacity in labour and capital and uncertainty is high,” it said.

The Commission said that a fiscal expansion of up to 0.5 per cent of GDP at the level of the euro area as a whole was desirable for 2017.

It said that a fiscal expansion of 0.3 per cent would be the lower bound of the range and would contribute to ensuring that the euro area halves its output gap in 2017, while being broadly compatible with the objective of fiscal sustainability.

It said a fiscal expansion of 0.8 per cent would represent an upper bound and would allow for the output gap to be fully closed already in 2017.

“However, such a stance may be overly expansionary, since it may fuel undesirable overheating in some member states and would add to fiscal sustainability concerns,” it said.