Paris, Berlin launch EU competitiveness pact

Germany and France proposed a competitiveness pact for Europe on Friday and EU leaders discussed strengthening a eurozone rescue fund, hoping to win back market confidence in the bloc's public finances. But there was almost immediate opposition to the Franco-German proposals, both on the way they were laid out without discussion and on the substance of the measures.
-- Propose pact to boost eurozone economy
-- EU states fret over Franco-German economic 'deals'
-- Talks focus on enlarged EFSF fund, economic co-ordination
Paris and Berlin - the driving forces behind eurozone policy - set out a wish-list of measures they want eurozone and other countries to sign up to including: limits on debt levels written into national laws; a higher retirement age, based on demography; the abolition of wages indexed to inflation, and; a minimum corporate tax rate
"Germany and France will make it very obvious that we intend to defend the euro as a currency ... we also want to defend it as a political project," German Chancellor Angela Merkel told a joint news conference with French President Nicolas Sarkozy just before a presentation to EU leaders. "We want to send out a clear message, that as the European Union, we intend to grow together. What we want to establish is a pact for competitiveness," she said.
Ireland opposes a minimum corporate tax rate, Belgium, Spain and Portugal oppose the abolition of index-linked wage increases, and the retirement age measure is widely disliked. Most of the proposals by Berlin and Paris have already been set out by the European Commission in January in its Annual Growth Survey as part of the new, tighter budget co-ordination process called the European Semester.
European Commission President Jose Manuel Barroso said on Wednesday there was no need for separate agreements between governments on more economic co-operation since the same could be done on the basis of the Commission proposal. But France and Germany hope a deal between governments will ensure an agreement is reached more quickly - an important factor given the pressing nature of the debt crisis.
The two biggest eurozone economies want the pact to be part of a "comprehensive package" that leaders agree in March, when they hope to sign off on a series of measures that might help halt the eurozone's year-long sovereign debt crisis. The package is to include changes to the European Financial Stability Facility, the 440 billion euro bailout fund agreed last May, to increase its effective lending capacity and give it more flexibility on how to use its money. In draft conclusions prepared ahead of the summit, the 27 heads of state and government said they would consider "concrete proposals" for strengthening the EFSF "to ensure the necessary flexibility and financial capacity", with those discussions also expected to be finalised next month.
While no major decisions were expected on Friday, officials are aware that failure to agree on concrete measures before the next summit on March 24-25 could reignite market concerns. In a sign of returning investor confidence, Spain's borrowing costs fell sharply at bond auctions on Thursday. Portugal has also had encouraging recent debt sales. Strengthening the EFSF has been the focus of discussion for months, since it became clear its effective lending capacity was only about 250 billion euros, not 440 billion, due to guarantees built into the fund to maintain its triple-A credit rating. European Central Bank President Jean-Claude Trichet, who held talks with EU leaders over lunch, is among those calling for the EFSF to be enlarged and made more flexible, so that it is not just a bailout lender of last resort.