Business

Eurozone chairman backs Hollande investment idea

Jean-Claude Juncker
Image caption Mr Juncker poured cold water on Mr Hollande's demand to renegotiate Europe's new fiscal rules

Eurozone finance chairman Jean-Claude Juncker has backed the idea of boosting the European Investment Bank (EIB).

It is one of several measures demanded by the leading French presidential candidate Francois Hollande to boost growth in the eurozone.

Mr Hollande has said he wants the measures added to newly agreed limits on European governments' borrowing.

However, Mr Juncker poured cold water on the idea that the "fiscal compact" could be amended.

Despite his opposition to renegotiating the fiscal rules, Mr Juncker appeared to offer an olive branch in a speech in Hamburg on Monday, by backing Mr Hollande's idea that the EIB could play a bigger role.

Mr Juncker said that the bank's capital - its buffer against loan losses - could be increased by 10bn euros ($13bn; £8.1bn), which would increase its lending capacity by several times that figure.

The EIB is jointly-owned by the 27 EU nations - including the UK - and finances infrastructure, small and medium businesses, and green projects among other things.

'Pipe dream'

Mr Hollande is ahead of the incumbent President Nicolas Sarkozy in opinion polls, having already narrowly beaten him in the first round of voting a week ago.

The other pro-growth measures called for by Mr Hollande include:

  • the introduction of Europe-wide government bonds to finance infrastructure investment
  • a financial transactions tax
  • a reallocation of unused structural funds in the European Commission budget

If elected, Mr Hollande has said he would veto ratification of the fiscal compact - which was agreed by EU governments, except the UK and Czech Republic in March - unless some of his demands were met.

He has also expressed scepticism over the speed of spending cuts and tax rises advocated by Germany, earning support in other parts of Europe.

Mr Hollande has garnered support from other European leaders for the idea that the harsh austerity signed up to by European governments must be balanced by measures to boost growth.

Mr Juncker appears to have joined German Chancellor Angela Merkel in opposing the reopening negotiations on the fiscal pact - which has already been ratified in its current form by some countries.

Mr Juncker, who chairs the eurogroup of finance ministers, told the German Sunday newspaper Welt am Sonntag that he would "speak to Hollande" if the Socialist won the second round of presidential elections due this Sunday.

"The notion that you can renegotiate the pact from top to bottom and take substantial elements out of the text is a pipe dream," he said.

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