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Europe :: Hollande To Take Stand On Eurozone Austerity

The new French president is expected to flex his political muscles at a meeting of European leaders later, as he pushes back against austerity in the eurozone.

Francois Hollande will propose a series of measures to promote growth when he meets the EU's 26 other leaders, including David Cameron, at an informal dinner organised by the European Council.

They will discuss ways to fund large-scale projects in Europe, including jointly backing bonds for specific schemes and pumping more capital into the European Investment Bank, which is the lending arm of the European Union.

But senior diplomatic sources say Mr Hollande also wants to bring more controversial proposals to the table including so-called eurobonds, jointly backed by all eurozone countries, which Germany adamantly opposes.

He also will raise the issue of a Europe-wide financial transaction tax, which the UK refuses to countenance.

Other countries, including Sweden, the Netherlands and Ireland, also have reservations about such a scheme, which the commission supports.

Sources suggest the dinner will produce little in terms of concrete policy announcements, but will "shape the discussions" leading up to a formal EU summit on June 28.

However, they suggest the informal summit will mark a fundamental shift in the political underpinning of the EU as the dominant Franco-German partnership of Angela Merkel and Nicolas Sarkozy has now been dismantled.

Together they pursued belt-tightening in indebted countries as the main prescription for the ailing eurozone, but now the German chancellor is increasingly isolated as Mr Hollande appears to be heading a new coalition of those who favour a more nuanced approach.

That includes Italian prime minister Mario Monti and European Commission president Jose Manuel Barroso who believe Europe needs to balance cuts with more aggressive measures to plump growth.

But Germany, as the eurozone's powerhouse, still wields considerable influence over the EU.

The main question is whether Ms Merkel will drop her resistance to EU financial institutions, such as the European Central Bank, or the temporary and permanent bailout funds becoming more actively involved, by buying up debt or pumping cash directly into banks.