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Hollande set for EU budget compromise, warns on growth

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(Globalpost/GlobalPost)

French President Francois Hollande said Tuesday that he was ready to compromise on the EU's trillion-euro 2014-20 budget but warned that the spending cuts some members want must not 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 after a bad-tempered November summit failed to get an accord.

"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.

Questioned by MEPs, the French president insisted it was his "duty to look for a compromise" when EU leaders meet Thursday and Friday in Brussels, with Paris ready for sacrifices even on farm spending, a key concern for it.

"I will not have it said that France is prepared to sacrifice growth policies simply to defend" the Common Agricultural Policy, of which it is a major beneficiary, Hollande said.

Asked whether a deal was possible in light of Britain's hardline stand, he said France would not stand in the way given the wider importance of the budget to economic recovery, adding: "We were the first to say that the priority has to be growth."

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

The 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 told MEPs 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" -- and so had to ensure that core spending remained in place to promote vitally needed growth.

The French president said Cohesion Funds and the CAP -- the EU's main spending commitments and key targets for those seeking cuts -- were essential.

"All of us benefit from that in terms of growth ... we cannot set the one (policy) against the other," he said.

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 this week's summit 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 directly to British Premier David Cameron, who has promised a referendum after renegotiating London's EU membership terms, 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/hollande-set-eu-budget-compromise-warns-growth