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CORRECTED: Hollande warns EU budget cuts must not hurt growth

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(Globalpost/GlobalPost)

French President Francois Hollande warned Tuesday that while cuts to the EU's trillion-euro budget for 2014-20 were needed they must not be allowed to undercut fragile growth.

"Yes, make cuts but weaken the economy, no," Hollande told the European parliament just days before EU leaders take up the hotly contested budget again.

"A compromise is possible but it needs to be reasonable and so it will be necessary to argue (the case) with those who want to cut the EU budget beyond what can be accepted," he said.

Hollande had warned on Sunday that "the negotiations are very difficult ... the conditions are, at this moment, not yet in place" for an accord at the summit in Brussels on Thursday and Friday.

A bad-tempered November summit failed when several member states, led by Britain, called for sharp budget cuts at a time when all governments were having to reduce spending so as to balance the public finances.

Hollande insisted that France was committed to the European project, an economic and social model "envied on all other continents," but the debt crisis meant that many people were losing faith, putting national interests first.

"The eurozone crisis is to a great extent behind us but the challenge today ... is the mistrust of our people," he said.

Against this backdrop, EU could not simply adopt tough austerity policies -- "France will not accept that," he said -- and so had to ensure that core spending remained in place to promote vitally needed growth.

The French president said Cohesion Funds and the Common Agriculture Policy -- the EU's main spending commitments and key targets for those seeking cuts -- were essential in developing the union.

"All of us benefit from that in terms of growth ... we cannot set the one (policy) against the other," he said, adding that the 2014-20 budget must bolster the growth commitments agreed at a key June summit.

The budget must also "support the most vulnerable, those most exposed to the crisis, the poorest," Hollande stressed, highlighting the dangers of soaring unemployment, especially among the young.

EU leaders, including German Chancellor Angela Merkel, have warned that the summit Thursday and Friday is unlikely to produce an agreement.

EU President Herman Van Rompuy proposed in November a reduced budget of 973 billion euros ($1.33 billion) but failed to bridge the differences, with London seeking an even sharper reduction to 886 billion euros.

The main dispute concerns how spending cuts should be divided up between Cohesion Funds, which help newer members catch up with their peers, and the CAP, jealously defended by France.

The European Parliament plays a key role because it has to approve any budget accord.

Hollande also said that it was "legitimate to work on a new architecture for the European Union" but cautioned against member states picking and choosing what parts of the EU they wanted.

Without referring to Cameron, who has promised a referendum after renegotiating London's membership terms with Brussels, the French President said "Europe is above all an expression of political will.

"That is to say ... (members) accepts both their rights and their obligations ... rules are respected, confidence creates solidarity and it is a project where you cannot discuss ad infinitum its basis, calling everything into question at each stage."

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http://www.globalpost.com/dispatch/news/afp/130205/corrected-hollande-warns-eu-budget-cuts-must-not-hurt-growth