* Hollande proposes euro zone government with new powers
* French told they must work longer to earn full pension
* Marathon news conference marks first year in power
By Mark John and Ingrid Melander
PARIS, May 16 French President Francois Hollande
called on Thursday for an economic government for the euro zone
with its own budget, the right to borrow, a harmonised tax
system and a full-time president.
At a 150-minute news conference marking his first year in
office, a day after economic data showed France had slipped into
recession, the Socialist leader defended his record on economic
reform and budget discipline and told the French people they
would have to work "a bit longer" for a full pension in future.
Rebutting criticism that France has lost its leadership role
in Europe because of its dwindling economic competitiveness,
Hollande said he wanted to create a fully-fledged political
European Union within two years.
"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,"
"If Europe stays in the state it is now, it could be the end
of the project."
He acknowledged he could face resistance from Germany,
Europe's dominant power, which opposes mutualising debt among
member states. Berlin is also reluctant to give the euro zone
its own secretariat for fear of deepening division in the EU,
between the 17 members of the single currency and the 10 others.
Non-euro Britain's government already faces growing domestic
pressure to hold a referendum on leaving the bloc.
Hollande said he wanted Britain to stay in the EU but added:
"I can understand that others don't want to join (the single
currency). But they cannot stop the euro zone from advancing."
Speaking in Berlin before the French leader announced his
initiative, German Chancellor Angela Merkel said her relations
with Hollande were good, and she was "very optimistic" France
would strike a balance between growth and budgetary rigour.
Hollande said a future euro zone economic government would
debate the main political and economic decisions to be taken by
member states, harmonise national fiscal and welfare policies,
and launch a battle against tax fraud.
He proposed bringing forward planned EU spending to combat
record youth unemployment, pushing for an EU-wide transition to
renewable energy sources, and envisaged "a budget capacity that
would be granted to the euro zone along with the gradual
possibility of raising debt".
He also called for a 10-year public investment plan in the
digital sector, the promised energy transition, public health
and in big transport infrastructure projects.
Hollande's call for a stronger social Europe came as Spanish
Prime Minister Mariano Rajoy in Madrid rejected demands by
unions for greater protection for workers, saying he would
pursue cuts in education and health spending to reduce the
Spain's large structural deficit.
"Europe must be much more competitive and flexible," Rajoy
told reporters after the talks with labour groups.
Hollande, whose approval rating has fallen further than any
French president in his first year, sought to reassure left-wing
voters that he remained true to his Socialist colours.
He expressed full confidence in Prime Minister Jean-Marc
Ayrault, played down clashes among his ministers on economic
policy while urging the government to speak with a single voice,
and said there might be a reshuffle in due course, but not now.
He warned that France's pension system was unsustainable and
that a reform due later this year would mean the French having
to work longer in future to receive a full pension.
"As long as life expectancy gets longer, there is a
principle that is obvious. The longer we live, the longer we
need to work," he said.
Hollande's Socialists opposed a 2010 pension reform forced
through by his conservative predecessor, Nicolas Sarkozy, that
raised the minimum retirement age to 62 from 60. The Socialist
leader is hoping to avoid unleashing similar strikes and unrest
by having trade unions and employers negotiate a new overhaul.
The president reaffirmed a promise to reverse the rising
trend in unemployment by the end of the year, despite scepticism
among economists and voters that this can be achieved while the
economy remains flat.
On the slump in his own popularity, Hollande was phlegmatic:
"I became president at the worst of moments - but I put myself
forward just the same ... I knew it was the middle of a crisis."