France Calls For Establishment of Eurozone Government

Πηγή: Economy Watch
May 17 2013

French president Francois Hollande on Thursday called for a eurozone-wide “economic government”, with its own budget and full-time president as well as a harmonised tax system, as a step to deepen integration in the increasingly divided currency bloc.

With the appointed president, the proposed eurozone government would meet monthly to shed light on key economic developments in the unified bloc, said Hollande, who marked his first year in office as the most unpopular president in modern French history.

The French proposal, which Hollande said he would submit to his eurozone partners, also calls for much deeper fiscal integration between the eurozone nations, with a common budget and the authority to issue debt. The government would also debate the main political and economic decisions to be taken by member states and launch a battle against tax fraud.

"It is my responsibility as the leader of a founder member of the European Union...to pull Europe out of this torpor that has gripped it, and to reduce people's disenchantment with it," he said. "If Europe stays in the state that it is now, it could be the end of the project."

He acknowledged he could face resistance from Germany, Europe's paymaster, which opposes mutualising debt among member states. Berlin is also reluctant to give the eurozone its own secretariat for fear of deepening division in the European Union, between the 17 members of the single currency and the 10 others.

Instead, members have committed to much closer coordination of budget policies as well as the establishment of a centralised banking supervisor for the region.

Speaking at a separate event before Hollande announced his initiative, German Chancellor Angela Merkel said she may not have a "bosom friendship" with her French counterpart, but her working relationship with Hollande was strong and crucial for Europe.

"Living in an open society we must have nuances between conflict and bosom friendship. It seems there is nothing between the two - but the reality is different," Merkel told a conference on Europe in Berlin.

Promising to lead the bloc towards a fully-fledged “political union” – implying EU treaty change – within two years, Hollande added:

Germany has several times said it is ready for political union, for a new phase in integration. Well France is ready to give body to this political union and gives itself two years to do so … It is a question of European urgency.

Hollande’s comments come a day after official data showed that France had fallen back into recession in the first quarter of this year and for the third time since 2008.

Critics say Hollande has been slow to tackle France’s job crisis which has seen unemployment hit 10 percent – its highest since records began in 1996 – as well as failing to bring the budget deficit back under 3 percent of GDP.

Brussels has since given Paris two extra years to bring its deficit in line with EU targets, but in return it is demanding tougher reform of the French welfare state and high public spending.