* Europe must protect euro against "irrational" swings
* Hollande says exchange rate targets not needed
* Strong EU states must help boost domestic demand-Hollande
By Mark John
STRASBOURG, France, Feb 5 French President
Francois Hollande urged the euro zone on Tuesday to set a
mid-term target for its currency's exchange rate and to forge a
jobs policy to fight voter disillusionment.
But Hollande's call, in a keynote speech to the European
Parliament, ran into immediate opposition from Berlin which
opposes intervening on currency markets and says the bloc should
instead focus on making its economies more competitive.
Speaking two days before an EU summit where the bloc will
seek to overcome a stalemate on its budget, Hollande said that
European countries should agree on a "realistic" medium-term
exchange rate for the euro.
"The euro zone must, through its heads of state and
government, decide on a medium-term exchange rate," he told
journalists at a press conference after the speech.
Hollande's call echoes growing fears in some European states
and within his Socialist government that fresh gains in the euro
could hurt exporters and snuff out the recovery France needs to
restore its public finances.
"If there are trends like this (Hollande's call today), the
Slovak government is ready to support any proposals which will
help economic growth and Europe itself," Slovak Prime Minister
Robert Fico reporters in Bratislava.
However, concerns about euro strength were unlikely to win
over countries such as Germany which is strongly opposed to any
form of currency intervention and keen to limit its financial
contributions to Europe in an election year.
German Economy Minister Philipp Roesler, questioned about
the euro in Paris shortly before Hollande's comments, told
journalists: "The objective must be to improve competitiveness
and not to weaken the currency."
Growing confidence that the 17-nation euro zone is past the
worst of its debt crisis has helped strengthen the euro to
around $1.35 in recent weeks, although some analysts see
those gains as easily reversed.
"This is not about externally setting a target for the
European Central Bank, which is independent, but about engaging
the essential reform of the international monetary system,"
Some countries such as the United States and Japan have been
accused of using monetary policy to shape currency movements.
Any sign of interventionism in the euro zone could run up
against resistance from Germany, and the euro's rise would need
to show a significant impact on the economy before the European
Central Bank would contemplate reversing course and considering
an interest rate cut.
The ECB declined to comment on Hollande's remarks.
Hollande's ministers, notably his firebrand leftist Industry
Minister Arnaud Montebourg, have argued that a too strong euro
risks harming efforts to boost France's manufacturing sector.
France needs strong exports to help it meet the modest 0.8
percent growth target for 2013 on which its promise to cut its
public deficit to three percent of output is based.
Finance Minister Pierre Moscovici this weekend insisted that
France could still make its growth forecast, but added that "if
we have to adapt it, we will adapt it".
Hollande hailed the EU for avoiding a collapse of the euro
zone last year. But he said it now needed to show its citizens
that it can offer policies to combat rising unemployment.
"The risk is not so much public indifference (to the EU)
now, but a kind of a detachment - even a complete break with
it," said Hollande, whose 30-minute speech received a brief
standing ovation by parliamentarians.
European solidarity is to be tested later this week when
Hollande and other EU leaders assemble in Brussels to slug it
out over the bloc's budget for the next seven years to 2020.
France has already accepted that some cuts will be made to
the EU farming aid of which it is the major beneficiary, but
Hollande vowed to resist any attempt to cut the budget further.
"A compromise is possible but it must be reasonable ... I
say 'yes' to cuts for savings but 'no' to cuts that will hit the
economy," he said.