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Hollande: ECB must cut rates to boost economy

AFP · 20 Apr 2012, 11:57

Published: 20 Apr 2012 11:57 GMT+02:00

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The frontrunner in the race for the French presidency, Socialist candidate Francois Hollande, urged the European Central Bank on Friday to lower its interest rate to support growth.

France goes to the polls on Sunday to choose two candidates to contest a second-round presidential run-off on May 6, and Hollande is the opinion poll favourite, on course to oust right-wing incumbent Nicolas Sarkozy.

Asked in an interview with Europe 1 radio on the last official day of campaigning before the first round what the ECB could do to support growth, Hollande said: "There are two ways of doing that.

"The first is to lower interest rates, and I support that," he said, adding that his second solution would be to allow the central bank to lend directly to eurozone member states rather than just to private lenders. 

The ECB reacted to the eurozone financial crisis by providing unprecedented cheap credit to banks in a bid to encourage them to lend to embattled member states by buying sovereign bonds at reasonable interest rates.

But some experts pushed for it to go further towards monetising state debt, calling for it to provide credit directly to member governments and to expand its inflation-busting mandate to encompass pro-growth activism.

The ECB is forbidden by law however from purchasing government debt directly, and some economists argue that such a move would remove pressure on heavily-indebted governments to get their finances in order.

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Hollande has campaigned on his platform of a wider mandate for the central bank, but in the event of his victory France will find itself on a collision course with the eurozone's economic powerhouse, Germany.

Berlin is dead set against changing the ECB's current role of focusing on maintaining price stability.

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