PARIS (Reuters) - The European Central Bank should be more active in supporting economic growth in the euro zone and should allow the single currency to weaken against the dollar to boost the bloc’s exports, a top aide to France’s presidential frontrunner said.
Jerome Cahuzac, a Socialist member of parliament and a senior advisor to candidate Francois Hollande on budgetary matters, said a more pro-growth approach did not imply rewriting the mandate of the central bank, which requires it to guarantee price stability.
Hollande, who holds a comfortable poll lead over President Nicolas Sarkozy for a May 6 second-round vote, has raised heckles in Berlin with a promise to renegotiate a European budget discipline pact, signed by 25 leaders in March, to prioritize growth.
In his electoral program, he also pledged to “reorientate the role of the European Central Bank in this direction,” sparking speculation he would seek a dual-mandate for the ECB along the lines of the U.S. Federal Reserve’s double objective to fight inflation and support employment.
Hollande’s agenda caused irritation in Germany where Chancellor Angela Merkel had made the treaty a key condition of further support for struggling euro zone economies such as Greece and where there is a strong cultural antipathy to inflation, fuelled by memories of the hyperinflation of the 1920s Weimar Republic.
“It’s not a question of renegotiating the ECB’s mandate. That has never been suggested,” Cahuzac told Reuters in an interview. “But any growth strategy for Europe must be supported by the ECB. That’s a political will which needs to be clearly enunciated.”
Cahuzac said the central bank was independent, but this independence could not extend to dictating the policies of governments in the 17-nation zone, an increasing number of which saw Hollande’s emphasis on growth as essential to emerge from the debt crisis.
He said a crucial first step for the ECB was for it to weaken the euro against the currencies of the European Union’s main trade partners.
“It is surprising that a central bank is so attached to an exaggerated appreciation of the euro versus other currencies. I am thinking, naturally, of the dollar and the Chinese currency,” Cahuzac said, when asked about Hollande’s vision for the ECB.
“To start with, setting the European currency’s exchange rate at a fair value, that is to say a bit lower than today, would be good news for the exports of the euro zone in general and certainly for France,” he said.
The role of the ECB has moved close to the heart of the French election campaign ahead of a first round on Sunday. Sarkozy raised eyebrows in Berlin by declaring at a weekend campaign rally that he wanted a debate on having the ECB direct its exchange rate policy to propel growth, breaching a November agreement not to publicly discuss the bank’s role.
He reiterated on Wednesday that the euro’s exchange rate was an issue that should be up for discussion with ECB President Mario Draghi, saying that excessive rises in the value of the currency were hampering exporters.
“We cannot criticize Sarkozy for saying this because he is finally coming around to our way of thinking,” Cahuzac said.
Hollande has called for European project bonds to finance infrastructure in key areas like transport and energy, more lending by the European Investment Bank (EIB), and more effective use of EU Structural Funds to spur growth.
“The idea of a relaunching growth in Europe is winning over countries which had previously not spoken out on this subject: Spain, Italy, Austria and the Netherlands,” he said. “I don’t see how the Germans can oppose this because it is their interest too. Most of their trade is done with the euro zone.”
Reporting By Daniel Flynn; Additional reporting by Leigh Thomas, Matthias Blamont, Jean-Baptiste Vey and Catherine Bremer; Editing by Robin Pomeroy