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By TIM SHIPMAN
PUBLISHED: 18:25 EST, 7 May 2012
New French president Francois Hollande launched an outspoken attack last night on Britain’s obsession with protecting the City of London from Brussels-inspired legislation.
As David Cameron warned that the single currency is in ‘extreme trouble’, the socialist victor suggested that Britain is ‘indifferent to the fate of the euro area’ and ‘attentive only to the interests of the City’.
This is despite the fact that billions of pounds of UK taxpayers’ money is already being used to prop up the basket-case currency.
France's outgoing president Nicolas Sarkozy, right, shakes hands with president-elect Francois Hollande, left, before a ceremony marking the 67th anniversary of the Allied victory over Nazi Germany in World War II
Mr Hollande, who campaigned against austerity measures designed to save the euro, went on to threaten the UK with new Europe-wide taxes to neuter the City of London.
He signalled his support for an EU-wide transaction tax on financial deals and a fresh push for tax harmonisation – both of which are fiercely opposed by the British government.
The combination of Mr Hollande’s socialist demands for an end to austerity across Europe with political and economic turmoil in Greece pitched the continent back into crisis yesterday.
Panic selling sent shares and the euro into free fall in early trade before losses were clawed back in a late rally on a rollercoaster day across Europe.
The euro fell to a three-and-a-half year low of 80.44p against the pound and a three-month low of $1.2955 against the dollar before recovering.
Mr Sarkozy and Mr Hollande put aside their differences as they walk past the Arc de Triomphe in Paris as part of the memorial celebrations today
Mr Sarkozy touches his successor on the shoulder as they walk through the streets of Paris. Despite the closeness, their will be deep divisions in their view of France's economic policy
Shares around Europe were hammered in early trading before bouncing back as investors digested the news from Paris and Athens.
On a dramatic day across the eurozone, the Greek stock market plunged nearly seven per cent. But shares in Germany made small gains while France closed up nearly 2 per cent and Italy and Spain were more than 2.5 per cent higher.
Experts raised the prospect that Greece will fall out of the euro after 60 per cent of voters there backed parties opposed to austerity measures which have been demanded in exchange for massive bailouts by the international community.
To make matters worse, Mr Hollande placed himself on a collision course with both Britain and Germany.
Following his victory over Nicolas Sarkozy on Sunday night, he boldly announced: ‘Austerity can no longer be inevitable!’
There's work to do: French President Francois Hollande waves from the balcony of the Socialist Party headquarters
Difference of opinion: Mr Cameron will make plain his frustration with the chaos in Europe today, as Angela Merkel, right, continues to insist that austerity measures must stay in place
But yesterday German Chancellor Angela Merkel made clear that her government will not renegotiate the terms of the eurozone’s deal to save the single currency – which calls for austerity measures in exchange for bailout cash.
‘From our point of view, a new negotiation of the fiscal compact is not possible,’ said Mrs Merkel’s spokesman. Her parliamentary party leader Volker Kauder added: ‘Germany is not here to finance French election promises.’
Mr Hollande will make his first foreign visit as president to Berlin. But he will not see Mr Cameron until the end of next week at the G8 summit at Camp David. It is likely to be a tense affair.
In an interview with the French-language version of the Slate website, he condemned Britain’s approach to the euro crisis.
Mr Hollande made clear he resents Britain remaining outside the single currency because the Bank of England – unlike the European Central Bank – has been able to print money to keep the economy afloat.
He said: ‘In addition to relative indifference to the fate of the euro area, Britain is more protected because of speculation the central bank may intervene directly to finance the debt.’
‘Europe is not a cash box, let alone a cashpoint.’ Mr Hollande then went further by making clear that he would fight Britain over new EU taxes.
‘The British have been particularly shy about the issues of financial regulation, and attentive only to the interests of the City – hence their reluctance to see the introduction of a tax on financial transactions and tax harmonisation in Europe.’
The French president also made clear he is at odds with Mr Cameron over austerity. While the PM will insist in a speech later today that the UK sticks to the same economic course, Mr Hollande is demanding more borrowing to stimulate the economy.
‘Everyone admits that austerity alone cannot return balance to the public accounts,’ he said.
Mr Hollande offered just one olive branch, saying he would meet Mr Cameron for talks on defence and industrial co-operation.
‘I will meet David Cameron soon to discuss the benefits of further co-operation between our two countries on the industrial plan. We are committed to continued defence rapprochement.’
Asked whether he speaks English, he replied: ‘Yes, but I am attached to the French language. I will defend the ubiquitous use of French.’
The charge that the government is ‘indifferent to the fate of the euro’ comes despite Mr Cameron and Chancellor George Osborne repeatedly saying that a stable euro is good for Britain, not least because 40 per cent of Britain’s exports are to the euro area.
What is more, Britain has poured more than £12billion into bailouts for bankrupt euro nations such as Ireland and Portugal, and £40billion in loans to the International Monetary Fund to help pay for Greece’s bailouts.
Despite Mr Hollande’s ebullient tone, the greatest crisis last night was affecting Greece, where extremist parties are on the brink of power after mainstream parties who back the terms of the current bailouts failed to form a government.
Mr Cameron will make plain his frustration with the chaos in Europe today, when he warns: ‘The eurozone remains in extreme trouble and is in recession.’
The Prime Minister will use a speech alongside Nick Clegg to point out that the chaos afflicting the single currency is dragging Britain’s economy down as well.
‘I know that the task of driving our economy forward when faced with the headwinds that are blowing in from the eurozone is a formidable one,’ he will say.
Amid heightened tensions within the coalition following last week's drubbing in the local elections, the Prime Minister and Deputy Prime Minister will declare their determination to work together and do 'whatever needs doing to succeed'.
The so-called renewal of their 'marriage vows' marks the start of a crucial week for the Government, with the announcement tomorrow in the Queen's Speech of the legislative programme for the new parliamentary session.
In contrast to their initial appearance together two years ago in the Downing Street rose garden, Mr Cameron and Mr Clegg will set out their renewed commitment to work together against the more prosaic backdrop of a factory in Essex.
The tone too will be altogether more sombre, with the Prime Minister warning that the damage done in the financial crash of 2008 was 'greater than anyone thought', while Mr Clegg will liken it to a 'giant heart attack'.
Mr Cameron will stress that their 'number-one priority' was still to keep Britain safe from the financial storm raging in the eurozone and to rescue the economy from the 'mess' left by the last Labour government.
'That was and remains our guiding task and in these perilous times it's more important than ever for Britain that we stick to it,' he is expected to say.
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