The EU has eased its financial austerity demands giving France, Spain and four other countries more time to bring their deficit levels under control so that they can support their ailing economies.
The EU Commission said they must instead overhaul their labour markets and implement fundamental reforms to make their economies more competitive.
Issuing a series of country-specific policy recommendations in Brussels, commission president Jose Manuel Barroso said that the pace of reform needed to be stepped up across the EU to kick-start growth and fight record unemployment. "There is no room for complacency," he insisted.
After Europe's crisis over too much debt broke in late 2009, the region's governments slashed spending and raised taxes as a way of controlling their deficits - the level of government debt as a proportion of the country's economic output. But austerity has also inflicted severe economic pain.
Slashing spending and raising taxes have proved to be less effective at reducing deficits than initially thought. As economies shrink, so do their tax revenues, making it harder to close those budget gaps.
Besides France and Spain, the Commission is also granting the Netherlands, Poland, Portugal and Slovenia more time to bring their deficits below the EU ceiling of 3% of annual economic output. That means they will be allowed to stretch out spending cuts over a longer time as they try to fight record unemployment and recession.
The Netherlands and Portugal are now granted one additional year, whereas France, Spain, Poland and Slovenia are granted two additional years each.
Europe is stuck in a recession - which has led to an increasingly bitter debate over the merits of austerity as a way to solve the region's problems economic problems.
With rising unemployment, there is a growing consensus that governments must shift their policies toward fostering growth to end the downward economic spiral, even in countries like Germany that have long insisted vehemently on rigorous fiscal policies.
The new measures, however, are not a sign that Europe has abandoned its message of austerity and strict budgetary discipline altogether. Moreover, bailed-out Greece, Ireland, Portugal and Cyprus still have harsh deficit targets they have to meet to continue getting bailout loans. Mr Barroso rejected suggestions that the commission bowed to political pressure and switched focus away from austerity.