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Hollande threatens to block treaty over Merkel's cuts stance

Francois Hollande last night threatened to block the eurozone's new fiscal treaty unless Germany agrees to renegotiate its stringent austerity measures.

The French president-elect wants the treaty, seen as crucial to the survival of the single currency, to put more emphasis on growth.

Angela Merkel, the German chancellor, told France yesterday that there was no alternative to painful spending cuts.

But Benoit Hamon, spokesman for Mr Hollande's Socialist Party, said that the "politics of austerity" was failing to tackle the continent's financial crisis and that Mrs Merkel ''cannot override the will of the French people".

He said the new French president was determined to win a "trial of strength" over the fiscal pact, which aims to impose tough budgetary discipline on the 25 EU countries who have signed up.

Taoiseach Enda Kenny insisted yesterday that there would be no postponement of the referendum on May 31. He said that Ireland should waste no time in voting.

"It's clear now that you are going to have a growth agenda in addition to everything that's been agreed. So what I need and I want is a very strong Yes vote which sends out that message of certainty and which allows Ireland to declare for that agenda," he said.


But the potential rupture in the Franco-German alliance is set to be a major distraction in the campaign. Mr Hollande is due to fly to Berlin within hours of his swearing-in ceremony on May 15 for talks with Ms Merkel.

Yesterday, she laid down a marker by ruling out borrowing more money to fund the growth strategy that Mr Hollande is demanding. "Growth on credit would throw us back to the start of the crisis and therefore, we will not do that," she said.

Ms Merkel said there was no magic bullet for the national debt crisis in the eurozone.

"Only one thing is and remains sustainable: accepting that overcoming the crisis will be a difficult process that will only be achieved if we attack the origins of the crisis, which are the horrendous debts and a lack of competitiveness in some European countries," she said.

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Sinn Fein finance spokesman Pearse Doherty warned that the fiscal treaty would allow the EU Commission to dictate the content of future Irish budgets if the country did not balance its books.

"It is shocking that any state would voluntarily cede such economic sovereignty," he said.

The treaty requires the State to reduce its budget deficit from its current level of 13.1pc of Gross Domestic Product (GDP) to 3pc.

It has already made this commitment, but the treaty will insert it into law. And the commission can force a country to adopt budget measures if it does not meet its targets.

Meanwhile, Greek power-sharing talks entered a third and final round yesterday, as parties struggled to hammer out a coalition deal to avoid another general election.

The mandate to seek coalition partners passed to Socialist leader Evangelos Venizelos, whose traditionally dominant PASOK party was hammered in last Sunday's poll.

He has three days in which to seek some form of agreement, although since all the party leaders have already met during the previous two rounds, that looks unlikely. If his efforts fail, President Karolos Papoulias will convene all the leaders in a last-ditch attempt to cobble together a coalition.

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