Barroso rejects euro reform calls

European Commission president José Manuel Barroso has rejected French demands for reform of the economic governance of the Eurozone and downplayed fears of a recession.

Before attending a Eurogroup meeting last night, Mr Barroso said there was "no rational reason to fear recession" in Europe and urged EU leaders not to talk the economy into crisis or take "knee-jerk measures" that would undermine strong economic fundamentals.

"We must not endanger the stability of those foundations by yielding to the temptations of protectionism, or futile attempts to stem financial globalisation, or an artificial stimulus of the economy," he said in a statement before the monthly meeting in Brussels.

His upbeat comments were echoed by the chairman of the Eurogroup, which includes finance ministers from the 15 states using the euro, Luxembourg finance minister Jean-Claude Junker. He told reporters: "In the euro area, we are not in bad times."

Mr Barroso, who does not normally attend the eurogroup meetings, also underlined his strong backing for the independence of the European Central Bank (ECB) - a statement that will have provided some reassurance to smaller member states suspicious of French intentions.

"I have assured Mr Trichet of the commission's unwavering support for the independence of the ECB," he said after holding talks with Mr Trichet over lunch before the meeting.

"The governance of the euro area has served us well. There is scope for better co-ordination of economic policy to maximise the euro area's potential . . . But I see no need for a sweeping remake."

French president Nicolas Sarkozy has consistently called for improvements to the euro area governance and criticised the ECB's reluctance to intervene to reduce the strength of the euro. He has also indicated that France will push for these reforms when it takes up the six-month EU presidency in July.

Mr Barroso's comments came as Eurozone finance ministers heaped pressure on Paris over its adherence to the EU's revised stability and growth pact. This pact requires governments to keep their budget deficits below 3 per cent of gross domestic product and overall debt at no more than 60 per cent of GDP. It provides for financial penalties for states that breach the deficit ceiling.

Dutch finance minister Wouter Bos called for "preventive sanctions" against EU states like France that do not make sufficient efforts to balance budgets.