France's Hollande urges euro zone government, common debt

PARIS (Reuters) - French President Francois Hollande called on Thursday for an economic government in the euro zone that would have its own budget, the right to issue debt, a harmonized tax system and a full-time president.

Speaking at a news conference marking his first year in office, a day after economic data showed France had slipped back into recession, the Socialist leader said he sought to create a full political European Union within two years.

His proposals seemed likely to encounter stiff resistance from Germany, Europe's leading power, which opposes mutualising debt among European states and is reluctant to give the euro zone its own secretariat or create new divisions in the EU, of which 10 countries are not in the 17-nation single currency.

It also comes as Britain's government faces growing domestic pressure to hold a referendum on leaving the bloc.

"My initiative has four points that I am putting to our partners. The first is to create an economic government with the euro zone countries which would meet every month with a real president appointed for a long period and who would be devoted to this task," Hollande said.

"This economic government will debate the main political and economic decisions to be taken by the member states, harmonize tax policy, start the convergence of social policies from the top and launch a battle against tax fraud."

The other planks were:

- an initiative to bring forward planned EU spending to combat youth unemployment, now at record levels across southern Europe;

- a European energy community to coordinate the transition to renewable energy sources;

- "a new stage in fiscal integration with a budget capacity that would be granted to the euro zone and the gradual possibility of raising debt".

Hollande, whose approval rating has fallen further than any previous elected president in his first year, sought to reassure his left-wing electorate that he remained true to his Socialist colors, saying France could keep its generous welfare state provided it was made more efficient.

He expressed full confidence in Prime Minister Jean-Marc Ayrault and played down criticism of clashes among his ministers on economic policy, saying there might eventually be a reshuffle but not now.

But he said the current pension system was unsustainable and, ahead of a reform due later this year, said the French would have to work longer in future to receive a full pension.

He stuck to a promise to reverse the rising trend in unemployment by the end of the year, despite widespread skepticism among economists that this can be achieved while the economy remains flat.

He also called for a 10-year public investment plan in the digital sector, the promised energy transition, public health and in big transport infrastructure projects.

Hollande said it was paradoxical that Europe, which remained the world's number one economic power, was regarded "as a sick, declining, doubting continent.

"It is my responsibility as the leader of a founder member of the European Union... to pull Europe out of this torpor which has gripped it, and to reduce people's disenchantment with it."

(Reporting by Mark John and Ingrid Melander; Writing by Paul Taylor)

Source: http://news.yahoo.com/frances-hollande-says-wants-euro-zone-government-143842679.html

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