Brussels, Berlin lukewarm on Hollande's euro zone vision

BRUSSELS Fri May 17, 2013 9:26am EDT

French President Francois Hollande reacts as he speaks to journalists in the courtyard after a meeting at the Elysee Palace in Paris May 17, 2013. REUTERS/Gonzalo Fuentes

French President Francois Hollande reacts as he speaks to journalists in the courtyard after a meeting at the Elysee Palace in Paris May 17, 2013.

Credit: Reuters/Gonzalo Fuentes

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BRUSSELS (Reuters) - European officials gave a lukewarm response to French President Francois Hollande's sweeping proposals for deeper euro zone integration on Friday, noting that many of his ideas were already in circulation.

In a 2-1/2-hour news conference at the Elysee Palace on Thursday, Hollande set out plans for an "economic government" for the 17 euro zone countries, including its own budget and a full-time president.

The sweeping vision also encompassed a harmonized tax system and the ability for the euro zone to borrow money by issuing its own bonds, a proposal that has been raised repeatedly over the past three years and been roundly rejected by Germany.

"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," Hollande said, casting himself as something of a savior.

"If Europe stays in the state it is now, it could be the end of the project."

The European Commission, the EU executive which presented detailed plans for closer integration in a "blueprint" published last November, said it was pleased Hollande was engaged on the same issues, calling it "food for thought".

"We see that the Commission and France share the common ambition for Europe, a more integrated Europe from a political and economic point of view," Commission spokesman Olivier Bailly told reporters.

"We welcome their desire to get involved in this discussion regarding the economic deepening and political union, and their ideas are welcome, and we have our ideas, of course."

Other officials cast Hollande's comments as an attempt to regain the initiative in the European debate, after criticism in recent months that France has lost its voice in Europe and no longer has the same influence and stature as Germany.

Political analysts argue the EU can only function successfully when France and Germany, who fought two world wars before overcoming their differences to forge the foundations of the EU 60 years ago, stand together and work in consort.

But the economic malaise that has gripped France over the past two years, including slipping into recession at the start of this year, has undermined Hollande's clout and left the nation lagging Germany, the euro zone's largest economy.

"Everything we're hearing from Hollande we've already heard from (Nicolas) Sarkozy," said an EU official, referring to the former French president, who also talked about the need for an economic government and jointly issued euro zone debt.

"This really sounds like 'back to the future'. It's more about Hollande trying to have a voice, trying to regain the initiative on the European agenda, but there's nothing new."

FRENCH 'WINDOW-DRESSING'

More importantly, it does not appear that Hollande has much backing from Berlin for his vision, which includes the ambition of forging a full "political union" within two years.

Chancellor Angela Merkel's spokesman told a news conference that Hollande's proposal was "interesting and worth considering" but was essentially something the chancellor had been discussing with Sarkozy since 2011.

"It has been part of German thinking for a while anyway, and we have been working closely with France on it," Steffen Seibert told reporters.

On the specific idea of creating a separate budget for the euro zone, the German economy ministry urged caution, pointing out that it could limit the rights of the German parliament, something guaranteed to make it unacceptable to Berlin.

"I think we should exercise caution on this," said a spokesman.

Officials in Brussels, speaking on condition of anonymity because they did not want to be seen to be meddling in Franco-German relations, said they had no indications Merkel was suddenly more open to France's ideas than before.

"It's not as if Hollande has suddenly identified some new appetite in Berlin for euro zone debt issuance and a single euro zone president," said a diplomat from a leading member state.

"Hollande's proposals are not based on any new entente between Paris and Berlin, it's just pie in the sky ideas."

Economic commentator Wolfgang Munchau, in his daily commentary on EU news and affairs, described Hollande's plans as a desperate attempt to revive his flagging domestic popularity.

"Essentially, this is not about Europe at all but about French politics, an attempt to calm down French critics who want France's voice to be heard," he wrote.

"Hollande repeated ideas that are known to be no-go zones for Germany. So it looks like a window-dressing exercise with no real consequences."

(Additional reporting by Stephen Brown and Andreas Rinke in Berlin and Paul Taylor in Paris; Editing by Hugh Lawson)

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