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European Union

France's Hollande warns against major EU budget cuts

French President Francois Hollande has warned that major budget cuts may extinguish growth in the recuperating eurozone. With EU budget talks days away, he also warned against national interests taking precedence.

Speaking in front of the European Parliament in Strasbourg, France's President Francois Hollande warned Tuesday that cuts to the EU's trillion-euro budget must not be allowed to undercut fragile growth.

His speech comes days before EU leaders negotiate the 2014-20 budget in Brussels after a failed summit in November.

"Yes, make cuts but weaken the economy, no," Hollande said, stressing that the new budget must also "support the most vulnerable, those most exposed to the crisis, the poorest."

Hollande sets out EU vision

When talks resume on Thursday, British Prime Minister David Cameron will lead a group of net contributors, including Denmark, the Netherlands and Sweden, in demanding the deep spending cuts, which dissolved talks in November.

Hollande said France is committed to the eurozone's survival, but said tough austerity policies were not the answer, "France will not accept that," he said, adding that the challenge today is facing “the mistrust of our people.”

He said Europe could not be an "accumulation of nations, each of which goes to the union for what it sees as useful to itself and itself alone," he said, warning that national interests should not take precedence over EU interests in upcoming talks.

Last month, British Prime Minister David Cameron announced he would seek to renegotiate ties with the EU and hold a referendum on whether Britain should stay in the union if his party Conservative Party is re-elected.

On Tuesday, Hollande rejected the idea of an “a la carte” Europe, calling the bloc “first and foremost a political will.”

Exchange rate vulnerability

On Tuesday, Hollande also called on the eurozone to develop an exchange rate policy to protect the currency from "irrational movements.”

"A single currency zone must have a foreign exchange policy otherwise it will see an exchange rate imposed on it (by the markets) which is out of line with its real competitive position."

He said without such a policy, "Europe... is leaving the euro vulnerable to irrational movements in one direction or the other."

However, Hollande stopped short of specific exchange rate targets.

He added that countries with strong exports, such as Germany, should stimulate internal demand to strike a fairer balance in the bloc.

hc/dr (Reuters, AFP, dpa)

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