France, Italy join hands over eurozone crisis

France and Italy presented a united front on the eurozone debt crisis amid deepening divisions over belt-tightening policies in the European Union.

PARIS: France and Italy presented a united front Wednesday on the eurozone debt crisis amid deepening divisions over belt-tightening policies in the European Union as some countries reach breaking point.

French President Francois Hollande met Italy’s brand new Prime Minister Enrico Letta, in Paris only days after he took office, and warned that austerity alone was “no longer enough”, stressing the need for a focus on growth.

“If one doesn’t notice that Europe equates to well-being, opportunities, growth; if one considers that Europe is a bad mother, this will become a big democratic problem because citizens will react against this bad European mother,” Letta told reporters after the talks.

“Europe must help people, it must not frustrate them.”

Hollande, meanwhile, said that “what is at stake is not only the European concept but political stability in our respective countries.”

The comments come as divisions over how the eurozone should tackle its debt crisis deepen, with growing calls for a refocus on growth and an easing of the spending cuts championed by Germany and its allies.

The International Monetary Fund changed tack last month and warned that the eurozone could become trapped in a destructive, downward spiral if it did not refocus on growth.

Spain last week secured an extra two years to meet European targets on the size of its budget deficit, after warning that an economy in which more than one in four of the workforce is unemployed could not withstand more pain.

Letta, who took office earlier this week after a two-month stalemate following Italy’s inconclusive February elections, also looks set to take a similar line with promises to focus on measures to kickstart the economy.

France, meanwhile, has seen its ties with Germany cool as the two countries struggle to see eye-to-eye over austerity — a rift that came to light Friday when Hollande’s Socialist Party accused Chancellor Angela Merkel of “selfish intransigence” in a leaked document.

Undaunted, Merkel has stayed firm, telling Letta on Tuesday that she did not think budgetary discipline and the goal of economic growth were incompatible as he made a lightning visit to Germany.

Hollande on Wednesday said a compromise could be found “beyond what separates us, or beyond the different situations of for instance Germany, France and Italy”.

But he sought to allay fears of a broader rift with Germany, saying the two countries must “work together whatever the situation, whoever the individuals who manage it are and whatever the sensitivities”.

Letta, meanwhile, said his country would stick to budget promises made to the European Union, and called for the prompt establishment of a single European banking union to facilitate growth.

EU leaders in December agreed in principle on a banking union with its first component, a single supervisory mechanism, to be launched in March 2014.

The two other pillars of the banking union will include a bank deposit guarantee scheme and the establishment of a mechanism for dismantling failed banks.

“The banking union … is there, we decided on it, we must set it up, we must not lose any time in doing so,” he said.

– AFP/ac