Fight Eurosceptics with more integration: France's Moscovici

PARIS Mon Feb 10, 2014 5:28pm GMT

France's Finance Minister Pierre Moscovici reacts during an interview with Reuters at the Bercy Finance Ministry in Paris, January 30, 2014. REUTERS/Charles Platiau

France's Finance Minister Pierre Moscovici reacts during an interview with Reuters at the Bercy Finance Ministry in Paris, January 30, 2014.

Credit: Reuters/Charles Platiau

PARIS (Reuters) - Euro zone countries should launch ambitious new projects like common unemployment insurance to counter a surge in support for Eurosceptical parties, French Finance Minister Pierre Moscovici said in an interview.

Opinion polls suggest anti-EU parties are likely to make big gains in European Parliament elections in May, channeling voter frustrations with mainstream politicians' handling of a debt crisis that caused a prolonged recession and high jobless levels in many euro zone countries.

"The euro zone needs to be further integrated, the euro zone needs to be stronger so that citizens' attachment to their currency is firmer," Moscovici said in an interview conducted on January 30 as part of a Reuters Euro Zone Summit involving policymakers, politicians and market players.

A social democrat who previously served as European affairs minister and in the European Parliament, Moscovici suggested the 18-nation currency area should set up a joint budget to tackle unemployment.

"France wants a financial capacity, call it a budget, that could be used for unemployment insurance, which could -- why not? -- be financed by some of the proceeds from the financial transaction tax," Moscovici said.

Eleven EU countries have agreed to introduce such a tax but the plan has been dogged by EU lawyers' doubts over its legality. Paris and Germany aim to produce a joint proposal in the coming months to get the scheme launched.

Berlin has so far rejected any notion of a common euro zone unemployment benefit or other fiscal transfers beyond the existing EU budget, which amounts to less than 1 percent of the bloc's output -- a fraction of national budgets.

Chancellor Angela Merkel has accepted the principle of a small "solidarity fund" to help stressed euro zone states that make a contractual commitment to structural economic reforms.

Moscovici did not elaborate on how joint unemployment insurance might work, but a 12-page report commissioned by the French Treasury last year proposed a basic euro zone benefit, which national insurance programs would supplement.

With a budget equivalent to 2 percent of GDP, the euro zone could provide 20 percent of unemployment benefits and other measures governments use to smooth out swings in the economic cycle, the study calculated.

Moscovici said improving the governance of the euro zone was another major project the bloc's leaders needed to tackle.

He called for a full-time head of the Eurogroup of finance ministers, an idea backed by Germany and Italy, saying it could be merged with the existing post of EU economic and monetary affairs commissioner. Currently, Dutch Finance Minister Jeroen Dijsselbloem chairs the Eurogroup in a part-time capacity.

Moscovici has been mooted in the past as a possible candidate for either post, but he dismissed the idea that he was interested in any such role.

"I'm not a candidate for any job other than my own, and it's a very good job by the way," he said.

TREATY CHANGE

Despite his ambition for further euro zone integration, Moscovici saw no rush for a new treaty, although Britain is eager for changes to give it more flexibility in the European Union.

British Prime Minister David Cameron has promised a referendum on continued EU membership in 2017 after a proposed renegotiation if his Conservative party wins a general election next year.

Germany has said treaty change may be required for deeper integration of the euro area, but most other members oppose reopening the treaty to avoid divisive negotiations and difficulties with ratification.

"Everyone prefers to work within the current treaties, I think," Moscovici said, linking any change to the prospect of pooling euro zone government debt issuance.

"Our German friends never said they ruled out (joint) euro bonds, but that it was result of a process, and then a treaty could be justified. The modification of the treaties can not be a precondition."

Before it embarks on such projects, the euro zone has yet to complete the foundations of a banking union, with tough negotiations looming between member states and the European Parliament over a system for tackling failed banks.

EU governments agreed with great difficulty in December on a draft plan for a single resolution mechanism to decide when and how banks need to be wound up. They aim to wrap up the negotiations before European elections in May but lawmakers are pushing for substantial changes.

Moscovici ruled out radical changes to the plan, which aims to build up over 10 years a fund financed by levies on financial institutions to cover the cost of bank failures after shareholders and creditors have taken losses.

EU parliament lawmakers want a stronger common safety net for failed banks, empowered to borrow on financial markets or from the euro zone's rescue fund, but Germany and its allies have blocked any direct recourse to taxpayer funds.

"We've done everything we can so that decisions are taken during the mandate of the current parliament. It would be our collective mistake not to do so," Moscovici said.

FRENCH RECOVERY

Turning to the outlook for France, Moscovici said he hoped President Francois Hollande's plans for tax breaks to boost business activity would begin bearing fruit this year.

In a shift towards more business-friendly policies, Hollande offered last month to phase out 30 billion euros ($40.8 billion) in payroll charges that companies pay annually to finance family benefits in exchange for a commitment to meet targets for hiring and investment.

With France's recovery lagging many others in the euro zone, Moscovici said growth in the euro zone's second-biggest economy could top the 0.9 percent forecast thanks to the plan.

"We want France to have growth above the euro zone average," he said. "France's place is not in the euro zone's average, but as a leader."

(For other news from Reuters euro zone summit, click on: here)

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(Reporting by Leigh Thomas; Additional reporting by Yann Le Guernigou and Jean-Baptiste Vey; Editing by Paul Taylor)

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