European Union firms urged EU finance ministers on Monday to improve public finances of the 27-nation bloc as ballooning deficits and debt were a major obstacle to recovery.

"The severe and synchronised deterioration in public finances now represents a major stumbling block to the recovery," BusinessEurope, which speaks for 20 million European companies, said in a statement.

It said the surge in government borrowing, which the European Commission expects will push debt in the 16 countries using the euro to 84 percent of gross domestic product this year form 69 percent in 2008, was crowding out corporate access to credit and eroding confidence in the euro.

"Important measures need to be taken urgently to consolidate the recovery," BusinessEurope President Jurgen Thumann told a news conference, adding he would send the message to EU finance ministers meeting in Brussels on Monday and Tuesday.

To successfully consolidate public finances, euro zone economies need to expand faster than the current potential growth rate of around 1 percent annually, BusinessEurope said.

Structural reforms were therefore crucial, as was an effective mechanism that would ensure their implementation.

"This is a critical moment for Europe - it can choose a road of success, which is the road of reforms, or stand idle and face the huge cost of inaction," Thuman said.

BusinessEurope said that to avoid the failures of the EU's previous reform programmes, like the Lisbon Strategy, European Union institutions should name and shame reform laggards and set best performers as an example for others.

"Benchmarking and greater tenacity of EU institutions to name good performers and shame countries falling short of their commitments will need to be a key pillar of such a governance structure," BusinessEurope said.

It said reform frontrunners, based on labour utilisation, productivity, investment, competitiveness and public finances were Austria, Cyprus, Czech Republic, Denmark, Finland, Germany, Luxembourg, the Netherlands, Norway, Poland, Slovakia, Sweden and Switzerland.

Among the laggards were Belgium, Estonia, Greece, Italy, Latvia, Lithuania, Malta, Portugal, Romania, Spain and Britain.

Reuters, Balkans.com Business News