Jospin urges EU to spend billions

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THE FRENCH Prime Minister, Lionel Jospin, demanded a more assertive European economic policy yesterday and backed ideas for a multibillion- pound spending programme to kickstart continental economies.

His ideas, reminiscent of ambitious plans once pioneered by Jacques Delors, the former EU Commission president, raises the prospect of a new bid from the centre-left to shape European policy.

It also threatens to underline the isolation of Britain which, because it is not taking part in the single currency, might be excluded from the proposals.

In Brussels yesterday, Mr Jospin held out the prospect of an alliance with the incoming German government over a more Keynesian thrust to Europe's economic policy after the single currency launch next January.

"Europe has to set itself the objective of stronger growth," Mr Jospin said, adding: "This was the declaration of the person who will be the next German chancellor, and I am very pleased about this."

The French Prime Minister, who held talks on ways of funding new investment with Jacques Santer, the EU Commission president, said he would examine any plans that would help to achieve growth. He said: "We want to be a driving force and we are prepared to play this driving role with the Commission."

Behind Mr Jospin's initiative lie French hopes of a new economic consensus with Germany, adding to its long-standing diplomatic alliance. In preparations for the single currency, France lost its argument for greater political input into the operations of the European Central Bank in the face of stiff German opposition.

But Mr Jospin has been encouraged by Gerhard Schroder's victory in last month's election. French diplomats pointed yesterday to the announcement that Oskar Lafontaine, leader of the SPD, will be finance minister for the new coalition. He has upset the Bundesbank by calling for a political counter-balance to the European Central Bank.

The French premier's intervention followed a Franco-Italian summit at which the former premier, Romano Prodi, outlined moves to divert some of the European Central Bank's surpluses in infrastructure and research projects.

France has one reservation about the Prodi plan because it would involve selling large numbers of dollars, something that could destabilise the financial markets.

Britain remains hostile, and one official argued that excess reserves would be better returned to national governments.