Hollande fires warning shot at Merkel over austerity on eve of EU summit

Exclusive: In first British newspaper interview since becoming president, French Socialist leader says recession is as great a threat to Europe as debt

François Hollande: remarks highlight gulf between Paris and Berlin over how to tackle Europe’s worst ever economic crisis. Photograph: Thierry Zoccolan/AFP

François Hollande, the French president, has warned for the first time that the Paris-Berlin motor driving Europe could stall over deep differences on how to resolve the euro crisis, insisting on a climbdown byAngela Merkel in her emphasis on austerity and the surrender of national powers to tighten fiscal discipline.

Giving the  his first British newspaper interview since becoming president in May, Hollande said there was light at the end of the eurozone tunnel, but he also:

• suggested Merkel was too preoccupied with domestic politics in her response to the crisis

• demanded Berlin reverse its opposition to decisions taken by eurozone leaders in June

• called on the eurozone to act promptly to bring down the costs of borrowing for Spain and Italy

• insisted Greece be assured of staying in the eurozone

• gave short shrift to a German push for the creation of a federalised eurozone or political union

• and dismissed as unfounded the strong German criticisms of the recent moves on the crisis by the European Central Bank.

While the Franco-German relationship was the driving and "accelerating" force of the EU, Hollande said, "it can also be the brake if it's not in step. Hence the need for Franco-German coherence."

Hollande's remarks on the eve of a crucial EU summit in Brussels highlighted the extent of the gulf between Paris and Berlin and the deep divisions within the eurozone almost three years into Europe's worst ever crisis.

Solidarité

Interviewed by the and five other European newspapers from France, Germany, Spain, Italy and Poland, Hollande also called for monthly meetings of the national leaders of the 17 eurozone countries to end the cycle of "so-called 'last-chance' summits", which he said in the past had led only to "fleeting successes".

He said domestic electoral considerations should not get in the way of solving the euro-crisis. Merkel "is very sensitive to questions of internal politics and to the demands of her parliament. I understand that, and can respect that. But we all have our own public opinion. Our common responsibility is to put Europe's interests first."

France's first socialist president for 17 years also rejected the idea that Germany was the only nation putting its hand in its pocket for everyone else.

"We're all taking part in this solidarity. The French, the Germans, just like all the Europeans in the ESM [the eurozone's new rescue fund]. Let's stop thinking that there's only one country who's going to pay for the others. That's false. However, I know the sensitivity of our German friends to the problem of supervision. Whoever pays should control, whoever pays should sanction. I agree. But budgetary union should be completed by a partial mutualisation of debts through eurobonds."

Hollande's assertion of the need for the eurozone to pool some of its debt through eurobonds challenged one of Merkel's red lines. She has repeatedly refused to countenance the proposal and there is scant chance of her shifting that position as she moves into an election year.

"We are near, very near, to an end to the eurozone crisis," said Hollande. But decisions taken at the last EU summit in June had to be implemented "as fast as possible".

No Grexit

In June, EU leaders delivered a breakthrough deal, agreeing to make the European Central Bank the first supervisor of the eurozone's banks and to use the bailout funds to shore up weak banks directly rather than by lending the funds to governments. But Berlin is dragging its heels on the deal and last month shattered the confidence of its partners by walking away from the agreement.

Hollande insisted that the so-called "banking union" had to be finalised by the end of the year. He is demanding a German climbdown on the issue at the summit on Thursday and Friday.

Echoing calls by the Spanish and Italian governments for German support to bring down the costs of their borrowing in the bond markets, Hollande said they should be able to finance themselves at "reasonable" rates, and added it was unfair some eurozone countries were borrowing at 1% and others at 7%.

The Greek situation had to be dealt with "definitively" as "Greece has made so much effort and it must now be assured of staying in the eurozone".

"In the interests of all you can't inflict perpetual punishment on countries that have already made considerable efforts," he said.

For Hollande, the urgency of dealing with the crisis had to take priority over longer-term German-led calls for eurozone federation and political union. Only once immediate measures were taken could Europe look at changing its way of decision-making and "deepening its union". He suggested that political union – so dear to the Germans – would be on the backburner until after the 2014 European parliament elections.

Crucially, he warned against the issue of political union being used as a distraction to dodge difficult choices.

"The institutional issue is often evoked in order to avoid making choices. It hasn't escaped my notice that those quickest to talk of political union were often those the most reticent to take urgent decisions …"

Challenged that he specifically meant the Germans, he said: "No, I'm not pointing at anyone in particular." But he added: "Several times in the past, they [Germany] had sincerely made proposals on political union. Those were not picked up."

Read my lips: no new treaty

Outlining his recipe for tackling the crisis, Hollande called on Germany to help rebalance the eurozone economy by cutting taxes and raising wages to spur domestic demand and proposed policies sharply at variance with Berlin in terms of timing and sequencing.

"Solidarity" had to come first followed by deeper integration, he emphasised. "Whenever we take a step towards solidarity, the union – which means the respect of common rules around governance – should progress." He said the banking union was a very important role. "That solidarity can't go without democratic control. The banking union aimed at controlling finance would be an important step in European integration."

The German strategy, by contrast, is to insist on tighter, centralised controls of budgets and fiscal policies and then to move towards a pooling of liabilities for banks and debt once the new system is operational and seen to be working.

Asked whether in order for a more integrated political union it might be necessary to draw up a new European treaty and put it to referendums, Hollande shot back with a reference to the no vote on the European constitution in France in 2005. "If I remember rightly, we tried that formula in 2005 and it didn't produce the results we were hoping for. Because before launching into institutional mechanics, Europeans must know what they want to do together. The content is more important than the framework," he said.

He insisted France would "tirelessly" champion the growth agenda – "this compromise between getting out of debt and growth" – without questioning the need for budget discipline, which had been made "absolutely necessary" by the sovereign debt crisis. "Today, recession is as big a threat as deficits."

Brits on the backfoot

Hollande said his approach was "a Europe that advances at varying speeds, with different circles. We could call them 'avant garde', 'precursor states', the 'core' – names don't matter, it's the idea that counts." This meant strengthening the regular meetings of eurozone governments.

. He said the leaders of other countries intending to join the single currency could also take part in his proposed monthly summits of eurozone national leaders, but on less than equal terms, as "associates". But, in an implicit nod to David Cameron and other non-euro zone countries not to interfere if they were standing outside, he added: "Certain countries don't want to join [the eurozone]: that's their choice. But why should they come telling us how the eurozone should be run? It's a pretension I hear but that I don't think meets the need for coherence."

Asked if he would risk seeing Britain leave Europe, Hollande said: "I would like a UK fully engaged in Europe, but I can't decide in place of the British. I see that for the moment they want to be more in retreat. The British are tied by the accords they have signed up to. They can't detach from them. At least they have the merit of clarity. They aren't in the eurozone or budgetary union. I don't intend to force them."

The suggestion that Britain couldn't wriggle out of deals it had signed up to could be seen in London as a signal that it would not be easy for the UK to renegotiate binding European commitments in a way Cameron would like to.

Asked what was the biggest threat to the European Union, Hollande suggested it was "not being loved. Only being seen at best as an austere cash dispenser or at worse as a reform school."

In a message to Germany that France would stand by the others, he said. "France is the bridge between northern Europe and southern Europe. I refuse any division. If Europe has been reunified, it's not for it to then fall into egotism or 'each for one's own'. Our duty is to set common rules around the principles of responsibility and solidarity. As a French person, it's for me to ensure Europeans are conscious of belonging to the same group."

Asked if he had said that to Angela Merkel, he said: "She knows it perfectly. That was the meaning of her trip to Athens".

He said: "I'll do everything for Greece to stay in the euro and have the resources it needs by the end of the year, without it having to be necessary to inflict new conditions other than these already admitted by the Samaras government." But Hollande said he also felt for the Spanish and Portuguese people "who had paid dear for others' excesses".

"The time has come to offer a perspective beyond austerity". He said Spain must know the precise conditions for getting financing agreed in June. There was no reason to make its burden heavier.

Asked if the worst was over, Hollande said, "Yes, the worst – in the sense of the fear of the eurozone breaking up - is over. But the best isn't there yet. It's up to us to build it."

Interview conducted by Sylvia Kauffmann (Le Monde), Angelique Chrisafis (The ) Berna Gonzalez Harbour (El Pais), Jaroslaw Kurski (Gazeta Wyborcza), Alberto Mattioli (La Stampa) et Stefan Ulrich (Süddeutsche Zeitung)

In keeping with established practice in France, Hollande's quotes were approved prior to publication.

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Ditulis oleh: Unknown - Wednesday, October 17, 2012