Growth strategy for Europe top of president-elect's agenda

Wed, May 9, 2012, 01:00

FRENCH PRESIDENT-ELECT François Hollande has said Germany must take account of the growing clamour for measures to promote growth in European economies, but conceded that stimulus though extra public spending was out of the question.

Ahead of his first visit to Berlin next week, Mr Hollande said chancellor Angela Merkel would have to accept project bonds or a change to the mandate of the European Central Bank.

The socialist, formally taking over from Nicolas Sarkozy next Tuesday, agrees with the provisions of the EU fiscal treaty but says he wants a growth compact to kick-start Europe’s stagnant economies.

“We will have discussions with our partners, particularly our German friends, but they cannot close two bolts at the same time – one on eurobonds and the other on allowing ECB directly refinance debt,” he said.

By eurobonds, he was referring to “project bonds” to fund infrastructure and jobs. Germany has not outlined a firm position on this, but it remains implacably imposed to any change to the ECB’s mandate.

Differences have also emerged over how to achieve growth, with Germany stressing it should be done by structural reform and strengthening competitiveness through debt control, rather than by spending on credit.

On this point, Mr Hollande made a gesture towards German sensitivities, saying he agreed on the need to improve competitiveness and reform the tax system to strengthen French industry. He said stimulating growth through extra public spending was not the answer, as he wanted to balance the national budget – a feat not achieved in 40 years – by 2017.

“That means there cannot be extra public spending, since we want to rein it in, nor can they be tax relief, which is forbidden,” said Mr Hollande.

Rather, the solution was in the implementation at European level of measures he had championed during the election campaign – increasing the capital of the European Investment Bank, more efficient use of structural funds, and a tax on financial transactions and project bonds.

In an in-depth interview on international affairs, Mr Hollande reiterated his attachment to the “Franco-German engine” in Europe, but said Mr Sarkozy and Dr Merkel had made the relationship too exclusive during the euro-zone debt crisis. “The European authorities were neglected and certain countries, notably the most fragile, had the unpleasant impression of facing a directorate.”

The Hollande camp has brushed off claims that Dr Merkel’s support of Mr Sarkozy and her refusal to meet the socialist in Berlin during the campaign will cause tension between them.

The incoming president faces a hectic schedule after his inauguration next Tuesday. He is expected to travel to Berlin in the middle of next week before going to the US for G8 and Nato summits.

President Barack Obama has invited him to the White House for their first bilateral meeting, where the two will discuss Mr Hollande’s plan to withdraw French troops from Afghanistan by the end of the year – 12 months earlier than Mr Sarkozy had planned. He will then attend an informal EU leaders’ summit in Brussels on May 23rd.

In a sign of the power transition under way in Paris, Mr Sarkozy and Mr Hollande stood shoulder-to-shoulder yesterday at the annual ceremony to mark Victory in Europe Day and the surrender of Nazi forces on May 6th, 1945.