Hollande, German opposition turn up the heat on Merkel

François Hollande victory_small.jpg

French president-elect François Hollande met yesterday in Paris (9 May) with European Council President Herman Van Rompuy to discuss the eurozone crisis. Meanwhile, the German opposition has set its conditions: it wants the fiscal treaty, coupled with measures for growth, to be ratified on the same day in France, Germany and Italy. 

"They know each other already and have a good relationship," Pierre Moscovici told a news conference after the 50-minute meeting. "There was a very positive and deep exchange of views on the Europe Union … on the eurozone, with the Greek crisis at its heart, and the growth strategy."

European officials are seeking assurances of Hollande's commitment to reducing France's budget deficit and controlling public spending in light of his tax-and-spend election platform, the source said.

Ideas that could receive new impetus include both short-term moves to promote economic growth and long-term proposals to create common eurozone bonds, as well as a possible eurozone bank resolution and guarantee system, two EU officials said.

Defeated outgoing conservative President Nicolas Sarkozy, who also met Van Rompuy on Wednesday, had sided with Merkel in opposing common debt issuance, a stance French diplomats said was largely in deference to the chancellor's domestic political constraints.

"Hollande's election is a positive development that has already changed the narrative in Europe, which was getting stuck because of an obsession with fiscal austerity," one senior EU official said.

European Union officials said they have high hopes for the new French leader and his ability to build a working relationship with German Chancellor Angela Merkel that could revive blocked efforts to overcome the euro zone's debt crisis

The French president-elect will take his call to add growth elements to Europe's fiscal compact to Berlin next week.

"Hollande's arrival may invigorate discussion on some issues that have been frozen for the last few months and give them a welcome push forward," a second EU official said. "Eurozone bonds are no longer completely taboo."

In an interview published on Monday (7 May) but conducted just before he defeated Sarkozy in Sunday's runoff, Hollande told the Internet magazine Slate.fr that he would discuss common eurozone bonds with the Germans.

"They cannot maintain two vetoes at once, one on eurobonds and the other on the direct financing of (government) debt by the European Central Bank," he said.

Eurogroup President pays visit

Van Rompuy's visit came one day ahead of a trip to Paris by Eurogroup president Jean-Claude Juncker.

Juncker, head of the Eurogroup of eurozone finance ministers and also prime minister of Luxembourg, said on Monday he had made it clear to Hollande in a telephone call that he could not renegotiate the fiscal pact.

"What isn't okay is completely reopening the agreed fiscal treaty," Juncker told German broadcaster ZDF. "It will not be possible to change the substance of the fiscal pact, there will not be a formal new negotiation in that respect."

"But it is possible to add growth elements, not necessarily in the form of a treaty," he said. "And that is an issue that is somewhere in the pipeline."

Officials in Hollande's team said, nonetheless, the president-elect would tell Juncker exactly what he told French voters during his successful election campaign.

"He will tell him we need to get away from this focus on austerity which Europe is getting stuck in and which leads to stagnation," said Jean-Marc Ayrault, the Socialist parliamentary floor leader tipped as a possible prime minister under Hollande.

German opposition sets conditions

The centre-left opposition in Germany asked yesterday that Chancellor Angela Merkel that the Bundestag should ratify the European fiscal pact on the same day with the parliaments of France and Italy.
Merkel and Italian Prime Minister Mario Monti had already mentioned the possibility to vote the same day members of their country on this text to give a sign "agreement" at European level.

"The Franco-German friendship was and is an engine of European integration. Close cooperation on this subject therefore seems inevitable," wrote Renate Künast and Jürgen Trittin, the two leaders of the environmental group in Bundestag wrote in a letter to Merkel, of which AFP obtained a copy.

The SDP Social Democrats rallied to the idea. A vote "simultaneously in France and Germany would be really welcome," Michael Roth, spokesman for the SPD group in the Bundestag on European affairs told AFP.

As François Hollande, the SPD and the Greens call on to Merkel to pass measures for growth and establishment in Europe of a tax on financial transactions in exchange for their support.

To ratify the text, the coalition of the Liberal and Conservative Chancellor needs a two thirds majority in the Bundestag and the Bundesrat. Such a majority can not be achieved without the opposition.

Hollande, who won the election runoff with 51.6% support as voters punished Sarkozy for economic gloom, wants to launch an immediate challenge to German-imposed austerity policies in Europe after he is sworn in on May 15. He is expected to travel to Berlin shortly after that.

He is calling for negotiations to add pro-growth instruments such as project bonds to the budget responsibility treaty agreed by European Union leaders in February.

His challenge to austerity resonates across Europe after voters in Greece punished the mainstream parties for their acceptance of tough austerity measures in exchange for a bailout that is saving Greece from bankruptcy. 

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