Spain is slowly emerging from recession but needs to cut spending further and introduce labour market reforms, the Organisation for Economic Co-operation and Development (OECD) has said, BBC informs. The body also called for pension reform and an increase in the retirement age. Labour Minister Valeriano Gomez said the government intends to do just that. There has been much speculation recently that Spain might need to ask for financial assistance from fellow European Union (EU) members. This follows the joint EU and International Monetary Fund (IMF) bail out of the Irish Republic agreed last month, and a similar package agreed with Greece earlier this year. Many analysts have said that other countries with high levels of debt, particularly Portugal and possibly Spain, might be forced to ask for help. The Spanish government has repeatedly insisted that it will not need to apply for a bail-out. The OECD said Spain should return to growth next year. It forecast that Spain’s economy would grow by 0.9 per cent in 2011 and by 1.8 per cent in 2012. Unemployment, it said, which at almost 20 per cent is the highest in the EU, would “drop slightly” to 19.1 per cent next year and to 17.4 per cent in 2012, it said. It acknowledged the government’s efforts at “substantial fiscal consolidation”, as well as its steps to “to address long-standing shortcomings in the labour market”, but called for these measures to be “broadened and deepened”. The OECD said the country’s pension systems “must be reformed”, not only by increasing the retirement age, but by introducing restrictions on subsidies to early retirement. Mr Gomez said the government was looking at pension reform. “The best way to extend the length of working life is to push back the age of retirement to 67,” he said.v “Those who wish to retire at 65 can do so, but in this case they must accept a reduction in their pension.” The labour minister also said the period of time used to calculate pensions – currently the final 15 years of work – would be increased. The extension would take into account earlier years’ pay, which tend to be lower, thus reducing the pension burden on the state. The body also reiterated its current forecast that the government’s budget deficit would be 9.2 per cent this year, 6.3 per cent in 2011 and 4.4 per cent in 2012.