* 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 (Reuters) - 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,” Hollande said.
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.