Hollande meets Van Rompuy to discuss euro, growth

PARIS Wed May 9, 2012 1:43pm EDT

France's newly-elected President Francois Hollande is surrounded by the media as leaves his campaign headquarters in Paris May 7, 2012, a day after the French presidential election. REUTERS/Benoit Tessier

France's newly-elected President Francois Hollande is surrounded by the media as leaves his campaign headquarters in Paris May 7, 2012, a day after the French presidential election.

Credit: Reuters/Benoit Tessier

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PARIS (Reuters) - French president-elect Francois Hollande began his drive to persuade European partners to shift their economic policy priority from austerity to growth when he met on Wednesday with European Council President Herman Van Rompuy.

Hollande takes his call to add growth elements to Europe's fiscal compact to Berlin next week.

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

"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.

Van Rompuy's visit came one day ahead of a trip to Paris by euro group president Jean-Claude Juncker. 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 euro zone bonds as well as a possible euro zone 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 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. "Euro zone bonds are no longer completely taboo."

In an interview published on Monday but conducted just before he defeated Sarkozy in Sunday's runoff, Hollande told the Internet magazine slate.fr that he would discuss common euro zone 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.

The 50-minute meeting with Van Rompuy focused on the EU and the euro zone crisis, a spokesman for Hollande said.

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

CHALLENGE TO AUSTERITY

Hollande, who won the election runoff with 51.6 percent 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.

"These are votes in favor of a Europe which is not committing itself to a miserable agenda of ever-smaller government and ever-smaller budgets," the leader of the Dutch opposition Labour party, Diederik Samsom, said in reference to the elections in France and Greece.

The Dutch coalition collapsed late last month after failing to agree on a budgetary plan to cut the deficit to below 3 per cent of GDP by 2013. The Labour party was the largest mainstream party to reject a subsequent five-party emergency budget that stuck to fiscal consolidation targets.

Juncker, head of the Eurogroup of euro zone 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.

(Reporting by Nicholas Vinocur and Yann le Guernigou; Additional reporting by Thomas Escritt in Amsterdam; Editing by Alessandra Rizzo)

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