Hollande calls for ECB to lend directly to ESM fund

FRANÇOIS HOLLANDE, the socialist candidate for the French presidency, has said the European Central Bank (ECB) should help struggling euro zone states by lending them money through the EU’s bailout fund.

Raising a proposal that has been resisted by Germany, Mr Hollande said that since the ECB was not inclined to offer loans directly to governments, it should instead lend to the European Stability Mechanism (ESM).

“Either the European Central Bank should lend directly to states, which it refuses to do for the time being, or there is another option,” Mr Hollande said in an interview on French radio.

“Rather than the central bank lending to banks, it could lend directly to this (ESM),” he added, referring to the €500 billion rescue fund which is due to be activated in July.

French president Nicolas Sarkozy, who trails Mr Hollande in opinion polls four days before the election run-off, had called for the ESM’s predecessor, the temporary EFSF bailout fund, to be given a banking licence so it could borrow from the ECB.

That idea was rejected by the ECB and by Germany, which said granting bank licences to the rescue funds would contravene EU rules banning the ECB from directly financing states.

Mr Sarkozy has in recent weeks joined Mr Hollande in calling for a more interventionist ECB, saying the bank should do more to drive growth.

Reports yesterday suggested Mr Hollande’s aides have had contacts with senior ECB officials to brief them on his economic plans.

According to the Bloomberg news agency, citing four campaign advisers, Mr Hollande’s team has spoken to at least two members of the ECB’s executive board. It said the meetings and telephone conversations began last year and have carried on as Mr Hollande’s campaign progressed. An ECB spokeswoman denied any such contacts had taken place.

Mr Hollande has said if elected he will place growth at the heart of the European agenda, starting with renegotiation of the fiscal treaty to add new components. Last week he pointed to remarks by ECB president Mario Draghi, who said the EU needed a “growth compact”, as a sign that his ideas were taking hold.