19th Aug 2022

Hollande proposes €120bn growth pact

Emboldened by a Socialist super-majority elected in the French parliament, President Francois Hollande has put a figure on his calls for an EU "growth pact" - €120 billion.

Most of it is old money, however.

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  • Hollande casting his vote (Photo:

The French Socialist Party emerged as a big winner in parliamentary elections on Sunday (17 June) and is set to take between 313 and 315 seats in the 557-strong National Assembly.

With the control of both the senate and the lower house, Hollande will not need the support of the Greens or the far left to push through his plans, which will have to include some spending cuts to meet EU deficit targets.

On an EU level, Sunday's victory gives him a stronger mandate to promoting his pro-growth agenda, which has already ruffled feathers in spending-wary Germany.

French newspaper Journal de Dimanche on Sunday published a letter sent by Hollande to fellow EU leaders in which he calls for a €120-billon-strong "growth compact" to jumpstart the eurozone economy.

The funds would come from three sources, it said: €55 billion from unused European structural funds, €60 billion raised by the European Investment Bank (EIB) and €4.5 billion in project bonds for infrastructure projects.

Only €10 billion would be fresh money, allocated to the EIB so that it can raise €50 billion more on the markets.

The newspaper also reported that Hollande has come to terms with Berlin's rejection of "eurobonds" - mutualisation of eurozone debt - until there is a full political union.

It said he is now looking to an EU integration "roadmap" for the next 10 years - to be presented by EU Council chief Herman Van Rompuy by October - instead.

He also wants to use a new financial transactions tax to partly fund the EU budget or growth projects.

Only nine EU countries, including Germany and Italy, so far back the tax proposal, with leaders possibly agreeing to move forward in a so-called enhanced co-operation allowed under EU law when no agreement is found at 27.

Hollande's letter is intended as an input to the so-called compact for growth and jobs to be agreed by EU leaders in Brussels on 28-29 June. It is to some degree his first test in EU politics after having campaigned against the austerity drive pushed by Germany's Angela Merkel and her "fiscal compact," which enshrines a debt brake in national laws of all EU states except Britain and the Czech Republic.

A first draft of the growth compact obtained by the Daily Telegraph shows diplomats are struggling to find a balance between the German-led emphasis on budget discipline and the more spending-friendly French stance.

It says recommendations issued by the EU commission for each country should be implemented with a particular focus on "growth-friendly fiscal consolidation," preserving investments in research, education and energy "and ensuring the sustainability of pension systems."

Banking reforms are urgent measures to tackle unemployment are also mentioned, as well as modernising the public administration and reducing red tape.

The EIB capital boost is also envisaged, but the sum is yet to be determined. "This decision should be taken by the EIB Board so as to ensure that it enters into force no later than 31 December 2012," the draft paper reads.

The financial transactions tax and steps towards a future banking union - with increased supervision by the European Central Bank - and a future political union are yet to be agreed upon.


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