* Moscovici, Rehn support using ESM to help banks
* At Brussels meeting, both back banking union
* Moscovici says Paris committed to 2013 deficit goal
(Recasts; adds quotes from France's Moscovici)
By Robin Emmott
BRUSSELS, June 4 France and the European
Commission signalled their support on Monday for an ambitious
plan to use the euro zone's permanent bailout fund to rescue
stricken banks, as European officials try to reassure investors
they can contain an escalating crisis.
Senior EU officials have promised firm decisions at a summit
at the end of June to resolve the 2-1/2 year debt saga, to
deepen integration in the euro and underpin the common currency,
showing they are committed to its future.
With Spain's indebted banks the most pressing problem,
French Finance Minister Pierre Moscovici said on a visit to
Brussels that using the ESM rescue fund to directly capitalise
banks was "a fundamental issue" that France would push at the
EU Economic and Monetary Affairs Commissioner Olli Rehn, who
met Moscovici for talks, said he was now "considering this as a
serious possibility", although he said the ESM's treaty does not
allow direct bank funding and leaders needed to work out how to
Germany, the euro zone's biggest economy and the biggest
contributor to the European Stability Mechanism, has so far
opposed any use of bailout funds without a country having to
submit to a politically humiliating austerity programme imposed
by the EU and the International Monetary Fund.
But Spain's banking problems - the result of a burst
property bubble aggravated by recession - and uncertainty about
Greece's survival in the euro zone, have given renewed urgency
to the need to protect the wider European economy.
"Regarding the need for direct recapitalisation of banks by
the ESM, it's a fundamental issue on which proposals are on the
table and on which I hope progress will be made at the EU
summit," Moscovici told reporters.
While politically complex, Rehn said Europe needed to break
the link between struggling banks and governments. He said a
European system for overseeing and managing the banking sector
would also be critical, something Moscovici said that Paris also
"We are now moving on in the discussion on the possible ways
and means to create a banking union," Rehn said.
A banking union would combine national deposit guarantee
schemes at the European level, a fund to close or salvage
failing banks and some centralisation of supervision.
Although EU leaders now want to go further with integration,
euro zone member countries still have some way to go to meet
their existing obligations - such as aiming for tight budget
Moscovici said Paris was committed to reaching its budget
goals for next year.
The Commission warned France last week that it risked
missing its deficit target of 3 percent of economic output in
2013 if it did not take further steps, sending a message to new
French President Francois Hollande that his growth agenda faces
"I want to convince (our EU partners) how serious we are
about the credibility of our programme," Moscovici said. "It's
feasible and achievable for us to reach 3 pct in 2013 and
balance in 2017. I told (our partners) that not only is it
achievable, but it will be achieved."
(Additional reporting by Catherine Bremer in Paris; editing by