Key allies with differing views

To mark his one year anniversary in office, the French president gave a wide-ranging 150-minute news conference on Thursday, a day after economic data showed France had slipped into recession.

The figures showed the eurozone contracted for the sixth straight quarter in the January-March period, the longest recession in the bloc's short history. Eurostat, the EU's statistics office, said nine of the 17 eurozone countries are in recession, with France a notable addition to the list.

Speaking to the media, Hollande argued that the eurozone should integrate more, calling for an economic government for the bloc with its own budget, the right to borrow, an integrated tax system and a "veritable" president. It would harmonize fiscal and welfare policies, and debate the main economic and political decisions taken by member states, Hollande proposed.

"It is my responsibility as the leader of a founder member of the European Union...to pull Europe out of this torpor that has gripped it, and to reduce people's disenchantment with it," he said. "If Europe stays in the state that it is now, it could be the end of the project."

His wishes could be somewhat at odds with Merkel, Germany's chancellor, who has rejected the idea of pooling European debt while stressing the need for austerity to make growth sustainable. France more strongly favors policies based around spending in a bid to promote growth. However, some elements of European integration, especially at the economic policy level with subjects like taxation and borrowing policies, have also been advocated by Berlin.

Speaking from Berlin on Thursday, Merkel stressed the need for reform in Europe.

"What we need above all is a common understanding in Europe - and there unfortunately isn't one yet - of what actually makes us strong and where growth comes from," Merkel told a policy forum.

Papering the cracks

She said that despite differences, she had a "good" relationship with Hollande. "The German-French relationship has a very strong foundation," said Merkel. "My personal relationship with the French president is a good relationship. That doesn't mean we don't sometimes have differences on an issue."

Hollande said that the relationship between the two nations was crucial to Europe being able to move forward, and that disagreements with Merkel were political, not personal.

"The first move that must always be made, and this is how we have moved forward in the last year, is to find a compromise between France and Germany," Hollande said of a process that "has sometimes taken a while," but was always ultimately successful.

The French president also said that his country's economic situation meant it was key to reach deals now, "without waiting for the German elections" on September 22.

"I respect the German voters and I am not going to interfere," Hollande said when asked for his predictions on the neighboring election. Merkel had said in the run-up to France's 2012 election that she would favor the re-election of Nicolas Sarkozy, though she stopped short of taking up an invite to appear on the campaign trail with Hollande's predecessor.

Merkel on Thursday responded to a leaked document from within Hollande's Socialist party, which accused her of "selfish intransigence."

"When I'm accused of selfishness, then I can answer very well that of course I am not selfish, but I know that in the long term Germany will only do well when the whole of Europe does well," Merkel said. "And Europe also doesn't do well when Germany is doing really badly."

jr/msh (AFP, AP, Reuters)