French President Francois Hollande called on Thursday for the euro zone to adopt bold new mechanisms to insulate member states and their banks from market turmoil, such as a joint fund to pay down debt, putting him on a collision course with Berlin. By Elizabeth Pineau and Steve Scherer.
After a meeting with Italian Prime Minister Mario Monti in Rome, Hollande said he would urge EU leaders at an end-June summit to adopt a series of measures to strengthen economic growth and financial stability in the euro zone and deepen economic integration.
Hollande said he had submitted details of his proposals to European Council President Herman Van Rompuy.
“We need imagination and creativity to find new financial instruments,” Hollande told a joint news conference with Monti.
“To deepen financial union, there are many options such as a financial transactions tax and joint debt issuance, including euro bonds, euro bills or a debt redemption fund,” he said.
The French leader, who took office last month calling for a change of direction in Europe away from German-inspired austerity, urged closer cooperation between member states on financial regulation to break the link between struggling euro zone states and their weakened banking systems.
He called for the bloc’s ESM permanent rescue fund, which is due to start operation next month, to be given a banking licence to allow it to borrow money from the ECB to bolster its firepower.
Hollande’s bold proposals appeared to place him at odds with German Chancellor Angela Merkel who on Thursday rebuffed pressure for Europe’s largest economy to underwrite debt or guarantee bank deposits in the euro zone, despite soaring borrowing costs in Italy and Spain.
Hollande has long advocated a growth pact for Europe including a financial transactions tax and joint bonds to finance infrastructure projects, more lending by the European Investment Bank (EIB) and more effective use of structural funds.
Hollande is due to present his a position at a four-way meeting with Monti, Merkel and Spanish Prime Minister Mariano Rajoy on June 22, a week ahead of the summit, and is hoping to make progress towards a consensus.
“The aim of June 22 is to have a four-way contribution and an agreement between at least two parties on a joint position. A four-way agreement would be fantastic,” a French source said.
France believes at least 100 billion euros, preferably more, are needed in structural funds, project bonds and new capital for the EIB, the source said.
The source also said there was no deadlock between Germany and France on the issue of mutualised debt in the form of euro bonds, which France wants to be implemented in the next few years.
Monti, whose government has found itself in the market’s sights despite undertaking reforms, voiced support for Hollande’s growth agenda and said bolder steps toward integration were required in Europe.
“We both agreed that the progressive improvements made to euro zone governance are not enough to shield the euro from market turbulence,” he told the news conference.
“We discussed some proposals for common bonds and we were very much in agreement on the need to increase investments that are productive for the economy – from the private sector, from the public sector, and from private-public partnerships.”
Three days ahead of Greece’s elections, Monti said that both he and Hollande wanted the country to remain in the euro zone. DM
Photo: Italian Prime Minister Mario Monti (R) shakes hands with French President Francois Hollande speaks during a news conference at Chigi palace in Rome June 14, 2012 . REUTERS/Max Rossi
While we have your attention...
An increasingly rare commodity, quality independent journalism costs money - though not nearly as much as its absence.
Every article, every day, is our contribution to Defending Truth in South Africa. If you would like to join us on this mission, you could do much worse than support Daily Maverick's quest by becoming a Maverick Insider.
Click here to become a Maverick Insider and get a closer look at the Truth.
Canola oil is named such as to remove the "rape" from its origin as rapeseed oil.