France seeks €120 bn EU package, euro bonds later

Paris: France wants the European Union to agree before the end of 2012 on growth-boosting measures worth €120 billion, the weekly Journal du Dimanche said on Sunday, citing a proposal circulated by France ahead of an end-June summit.

The newspaper also reported that France has accepted Germany’s rejection of its call to issue mutualised debt in the euro bloc and now agreed that so-called euro bonds were a project to be looked at over a 10-year time frame.

The €120 billion are to come from a combination of short-term growth instruments such as project bonds, reallocated EU structural funds and fresh investment capital from the European Investment Bank.

French President Francois Hollande submitted his ideas to EU partners and the European Council a few days ago ahead of a Group of 20 summit in Mexico on Monday and Tuesday and four-way talks with the leaders of Germany, Italy and Spain in Rome on Friday.

“From June, the European Council should adopt growth measures having a rapid impact and totalling €120 billion,” the newspaper cited Hollande as saying in the document, entitled “European growth pact.”

Hollande said the measures should be enlarged upon before the end of 2012 with the creation of a financial transaction tax and measures to create jobs, especially for young people.

The €120 billion would be made up of some €55 billion of unused EU structural development funds, some €4.5 billion in project bonds for infrastructure projects and €60 billion in capital that could be raised by the EIB if it were given an extra €10 billion in financing, the newspaper said.

Hollande, France’s first Socialist leader in 17 years, is demanding that Europe complement a budget discipline pact agreed earlier this year with a growth pact, an idea so widely supported that Berlin has come around to it.

Hollande has put himself on a collision course with the German government, however, with his push for the euro zone to adopt new mechanisms to insulate member states and their banks from market turmoil, such as a joint fund to pay down debt.

Hollande discussed his ideas with Italian Prime Minister Mario Monti in Rome on Thursday and also circulated them to European Council president Herman Van Rompuy and others two weeks before the crucial 28-29 June summit.

The French president also wants the euro zone’s ESM permanent rescue fund to be given a banking licence to allow it to borrow money from the European Central Bank to bolster its firepower.

German Chancellor Angela Merkel strongly opposes creating euro bonds in the near term or having Germany underwrite debt or guarantee bank deposits in the euro zone.