France's Socialist presidential frontrunner said on Saturday he would overhaul an EU budgetary treaty to include a financial transactions tax and common European bonds to finance investment in the energy sector, education and urban development.
Francois Hollande, who has made renegotiation of the fiscal pact signed this month by 25 European leaders a central part of his campaign, also said he wanted to change the role of the European Central Bank to give it a broader mandate for stimulating growth, not just controlling inflation.
I solemnly affirm today that I will renegotiate this budgetary treaty for the good not just of France but the whole of Europe, Hollande told a meeting of Socialist politicians from across the continent.
This treaty is an illusion and it poses a risk ... It creates the conditions for a lasting economic crisis which would only reproduce budgetary imbalances.
Hollande said a broad financial transactions tax - dubbed a Tobin tax after the U.S. Nobel laureate who first proposed it in the 1970s to discourage speculation - should be applied across Europe on a wide range of financial instruments, including derivatives, to fund infrastructure and development projects.
President Nicolas Sarkozy, who trails Hollande in the polls by a wide margin for the May 6 runoff election, has proposed a narrower tax in France, mainly on trading in equities, saying he hoped this would inspire European partners to follow suit.
Hollande said the funding for infrastructure projects could also come from increased lending by the European Investment Bank (EIB), and from a more complete use of the structural funds already available for European Union countries, much of which he said was going to waste at present.
He also called for the firepower of the euro zone's permanent bailout fund, the European Stability Mechanism (ESM), to be boosted by allowing it to access liquidity from the ECB, like an ordinary bank.
The coalition government of German Chancellor Angela Merkel has staunchly opposed such a proposal.
The ECB must go further in playing its role of lender of last resort, Hollande said. I know this idea is not shared by everyone in Europe, but we must extend the mandate of the ECB. Price stability has been accomplished ... Now supporting growth should also be part of the ECB's mandate.
Hollande said that new European funds to stimulate growth needed to be used to regenerate impoverished urban centres across the continent, finance renewable energy, and provide opportunities to a generation of young Europeans whose future would otherwise be blighted by the ongoing financial crisis.
I want to make the youth a great European cause, Hollande told the meeting. I can't accept that youth unemployment is around 25 percent and there is despair among a generation which is growing up. Europe must make room for its youth.
(Editing by Mark Heinrich)