France refuses to back German for Eurogroup job

PARIS (Reuters) - France's new Socialist government is refusing to back Germany's candidate for the influential role of chairman of euro zone finance ministers amid differences with Berlin over joint euro zone bonds and bank recapitalisation.

Senior members of President Francois Hollande's government have signalled their reluctance to see German Finance Minister Wolfgang Schaeuble, an outspoken advocate of austerity, take charge of the Eurogroup as Paris pushes for a change of policy.

Asked in an interview this week if Schaeuble's nomination at an EU summit on June 28-29 was inevitable, Prime Minister Jean-Marc Ayrault replied: "We are not there yet". Ordinary Europeans were increasingly tired of Germany's insistence on austerity, he said.

Privately, French officials say Schaeuble's appointment is far from a done deal and there are several candidates who could meet the requirements for the job, including the incumbent.

One option, the sources suggest, is to ask Luxembourg Prime Minister Jean-Claude Juncker to stay on when his term expires in June until a permanent successor is found to chair Eurogroup meetings and act as spokesman for the 17-nation single currency bloc.

Asked on a visit to Luxembourg on Wednesday about Schaeuble's candidacy, Finance Minister Pierre Moscovici replied: "Jean-Claude Juncker is doing a good job heading the Eurogroup."

It is unclear whether the French stance is a tactic aimed at extracting policy concessions from Chancellor Angela Merkel or backing for French candidates elsewhere, or whether it stems from deeper opposition to Schaeuble's hard line on austerity.

Juncker himself has complained of tiredness after seven gruelling years seeking to build consensus among often-fractious euro zone partners as the currency bloc has slid into crisis. He has had health problems and acted irascibly in recent months.

The last surviving veteran of the founding of the single currency in the 1990s still to hold office, he has often sharply criticised Germany's treatment of its euro zone peers.

He appeared to slam the door to staying on when he criticised current European leaders as "ungifted pragmatists" in April and confirmed he would step down.

But Moscovici lavished praise on Juncker on Thursday, suggesting his vision was more in line with the new Socialist government's agenda for Europe, while emphasising differences with Berlin.

"Juncker was one of the first to propose euro bonds and as he told me yesterday, he is still in favour," Moscovici said. "He's a Christian Democrat, with a great social sensibility. He is both Francophone and Germanophone and has been at the centre of things. He can play a useful role."

CHANGE AFTER SARKOZY

It was a stark reversal after the departure of conservative French President Nicolas Sarkozy, voted out of office this month, who had a poor personal relationship with Juncker.

Sarkozy's close alliance with German Chancellor Angela Merkel - which led to the duo becoming known simply as "Merkozy" - had meant Paris and Berlin brought a united front to Eurogroup meetings in favour of slashing deficits quickly.

Moscovici said while the two countries saw eye to eye on parts of Hollande's growth agenda - such as more lending by the European Investment Bank (EIB) and EU project bonds to finance infrastructure projects - they were at odds on other issues.

"There are issues that are subject to lively discussion between France and Germany, such as Eurobonds," he said. "There is no German agreement on this... even if not all debt needs to be mutualised and we can discuss that topic."

France was pushing for the European Stability Mechanism (ESM), the euro zone's future bailout fund, to be used to recapitalise struggling banks, but Germany was opposed, he said.

The two countries' failure to agree on a candidate to run the European Bank for Reconstruction and Development led to a British contender beating Frenchman Philippe de Fontaine-Vive for the job this month, ruffling feathers in Paris.

Schaeuble's nomination has raised concerns in many quarters that Germany would win control over one of the most important European policy jobs, just as public frustration is rising across southern Europe with its drive for balanced budgets.

Diplomats said Schaeuble's brusque chairing of a Eurogroup meeting in Copenhagen in March, when he stepped in after Juncker walked out in a huff, had upset some participants and raised doubts about his suitability for the job.

Even in Germany, many are opposed. The opposition Social Democrats, who could win power at elections next year, have said Germany should concentrate on seeking the leadership of the ESM bailout fund instead, as its prominent role in the euro zone made it difficult to lead the Eurogroup.

(Reporting By Daniel Flynn; Editing by Paul Taylor)