Francois Hollande: we must tighten our bonds to save euro

French president Francois Hollande has called for the eurozone to adopt bold mechanisms to insulate member states and their banks from market turmoil, such as a joint fund to pay down debt, putting him on a collision course with Berlin.

After a meeting with Italian prime minister Mario Monti in Rome yesterday, Mr Hollande said he would urge EU leaders at a summit at the end of this month to adopt a series of measures to strengthen economic growth and financial stability in the eurozone and deepen economic integration.

Mr Hollande said he had submitted details of his proposals to European Council president Herman Van Rompuy.

“We need imagination and creativity to find new financial instruments,” Mr Hollande told a joint news conference with Mr Monti. “To deepen financial union, there are many options such as a financial transactions tax and joint debt issuance, including euro bonds, euro bills or a debt redemption fund,” he said.

The French leader, who took office last month calling for a change of direction in Europe away from German-inspired austerity, urged closer co-operation on financial regulation to break the link between struggling eurozone states and their weakened banking systems.

Mr Hollande’s bold proposals appeared to place him at odds with German chancellor Angela Merkel, who yesterday rebuffed pressure for Europe’s largest economy to underwrite debt or guarantee bank deposits in the eurozone, despite soaring borrowing costs in Italy and Spain.