REUTERS BRUSSELS EURO zone finance ministers need to impress finance markets with the size of their rescue fund for indebted countries when they meet later this week, the head of the OECD said on Tuesday, advocating “the mother of all firewalls”.

Investors and many European officials want ministers to agree a combination of the 17-nation currency area’s two rescue funds to nudge the International Monetary Fund into backing debt-stricken European economies, should they need help.

“When dealing with markets you must overshoot expectations,” said Angel Gurria, the secretary general of the Organisation for Economic Cooperation and Development (OECD).

Gurria said an impressive firewall was crucial because the euro zone’s public debt crisis was not over despite calmer financial markets this year, warning that the bloc’s banks remain weak, debt levels are still rising and fiscal targets are far from assured.

Despite his repeated calls for a euro bailout fund of around 1 trillion euros ($1.3 trillion), the bloc’s finance ministers look more likely to agree to a level nearer 700 billion euros when they meet on Friday in Copenhagen.

“The mother of all firewalls should be in place, strong enough, broad enough, deep enough, tall enough, just big,” Gurria said, flanked by the EU’s top economic official Olli Rehn.

Euro zone finance ministers are expected to agree on combining the European Financial Stability Facility (EFSF) with its permanent European Stability Mechanism (ESM). German Chancellor Angela Merkel signalled for the first time on Monday that she was prepared to consider boosting the firewall’s resources. As the euro zone economy flounders for the second time in just three years, the OECD said in a report the 17-nation area needed ambitious economic reforms and there could be no room for complacency.

“The pressure has come down, but we can’t draw too much comfort from signs of healing,” Gurria said at the report’s presentation in Brussels.

“Risk spreads remain at unsustainable levels for some countries and have showed signs of creeping up in the last few days,” he told a news conference.

In a departure from forecasts by the IMF and the European Commission, the OECD sees 0.2 percent growth in the bloc in 2012, rather than an outright contraction, although an OECD official said that is likely to be downgraded.

While economists are divided over just how deep any downturn will be this year, most agree that weak business confidence and budget austerity is eating into the purchasing power of European households, driving up unemployment and leaving Asian and US demand holding the key to growth.

Two years into the euro zone’s sovereign debt saga, EU leaders’ commitment to fiscal discipline and the European Central Bank’s stimulus of 1 trillion euros to banks have cooled the panic in money markets late last year that drove Italian and Spanish bond yields to near unsustainable levels.

But euro zone debt levels are likely to reach 91 percent of economic output next year, even as the bloc enacts some of the deepest austerity programmes in half a century, and well above the EU limits for a healthy economy.

While that level is lower than for the US and Japan, it is up from an earlier peak of 74 percent of GDP in 1996.

The OECD, which tracks industrialised economies to promote growth, cautioned that deficit-cutting goals needed to strike a balance with what was realistic, or the EU’s enforcement systems could lose credibility. The euro zone must “set out more credible and detailed medium-term budgetary plans”, the OECD said. The crisis demands austerity, but recession in EU countries may make it harder for leaders to impose sanctions on member states.