BRUSSELS, Belgium – SOME European governments must slash debt sharply but others should keep spending to boost growth across the 27-nation bloc, a top EU official urged yesterday, as the region tries to solve a debt crisis by imposing budget cuts that risk triggering a new recession.

European Union Economy Commissioner Olli Rehn said financially troubled Greece, Spain and Portugal must push through harsh austerity programmes now. But he warned that “efforts should be different according to the fiscal situation.”

Countries running relatively lower deficits could “maintain less restrictive fiscal stances for the sake of growth in Europe as a whole,” Rehn told reporters.

Investors fear the austerity measures to deal with the debt crisis will hurt economic growth for years, by cutting off government stimulus to the economy. Fears of an immediate default have been eased by a euro750 billion (US$1 trillion) rescue package that is to be made available to governments if they need it. But for the long term, many wonder whether some countries will face growth so weak that they will have trouble paying off debts.

Spain acknowledged yesterday that new austerity measures demanded by other EU nations will curb its economic growth next year. Finance Minister Elena Salgado’s budget cuts will

shave a “few decimal points” off the country’s 2011 economic forecast of 1.8 per cent growth.

Spain and Portugal drafted new spending reductions last week — under pressure from Germany and others who backed the “shock and awe” financial backstop — to calm market worries that they could follow Greece in requiring an EU bailout to avoid defaulting on debt.

Germany — which is paying the largest chunk of both the rescue package and a euro110 billion bailout for Greece — has taken the position that it’s time for austerity, and has made budget cuts a precondition for any financial help.

German Finance Minister Wolfgang Schaeuble said EU governments had to send a “necessary signal of confidence to markets” by pushing on with budget cuts and accelerate economy reforms that could eventually aid growth — and reduce the risk of countries seeking a bailout.

Dutch Finance Minister Jan-Kees de Jager said there is now “a broad consensus that the time of stimulating growth through public spending is over and what is required now is significant consolidation” of national budgets using austerity programmes.

“Many countries see a

now-or-never moment,” he told reporters.

EU officials also see it as the time to push for longer-term changes to widely ignored budget rules that are supposed to limit debt and deficits in the 16 countries that use the euro. Government talks start Friday on what new rules or sanctions the EU should introduce. Germany has called for the ultimate punishment of ejecting a country from the euro if it persistently ignores the rules.

Rehn also said it was “high time” to reinforce economic governance in the region, pressing EU nations to adopt his suggested tighter budget rules which he said could be put in place rapidly — unlike Germany’s proposal of ejecting euro members, which would need legal changes.

Market worries about Europe’s economy have helped fuel the euro’s fall to its lowest level against the dollar since April 2006 and lifted the price of gold: traditionally a safe haven when markets lose faith in other assets.

Eurozone finance ministers defended the euro as a “credible” currency on Monday, saying price stability in the region will remain for years to come and “is a major feature of the euro and a major asset for investors.”