PARIS, May 16 (Reuters) - Following are highlights of a news conference given by French President Francois Hollande to mark his first year in power and defend his government's reform record with the euro zone's second largest economy now in recession.
HOLLANDE ON EUROPEAN ECONOMIC GOVERNANCE
'My initiative has four points that I am putting to our partners. The first point is to create an economic government with the euro zone countries which would meet every month with a real president named for a long period and who would be devoted to this task alone.'
'This economic government will debate the main political and economic decisions to be taken by the member states, harmonise tax policy, start converging social policies from the top and launch a battle against tax fraud.
'I reiterate here before you ... that the unemployment trend can be reversed before the end of the year.'
ON INVESTMENT PLAN
'I asked (Prime Minister) Jean-Marc Ayrault to present a 10-year investment plant around 4 sectors: the digital industry, the energy transition, health and large infrastructure projects. To ensure the financing we will have to be more creative than in the past.
ON GOVERNMENT RESHUFFLE
'Will there be a reshuffle one day? It's possible, but it's not for today, it's not for now.'
'We have to ensure the future of the retirement system. The 2010 reform did not allow for financial balance to be re-established. There is currently a deficit of some 15 billion euros. It's foreseen to rise to 20 billion in 2020. That's not sustainable.'
'The retirement system will be re-established to reflect our demography, which is by the way an asset compared to other countries. As long as life expectancy gets longer, there is a principle that is obvious. The longer we live, the longer we need to work.'
'If we're in the average (of forecasts), we will have flat growth in 2013. The whole question is whether we will have a recovery during the course of 2013. Will growth recover in the second half of the year? That demands a lot on European decisions.'
'We are told growth will be 1.2 percent in 2014. I would like to believe it. But rather than playing the game of forecasts which are very arbitrary and depend a lot on external factors, I prefer to focus on my objectives. Objective number one is changing Europe's direction to have more growth and less austerity. The second commitment is to take action straight away for jobs without waiting for a recovery.'
'I recognise that we cannot ask households to pay more taxes. The more savings we carry out, the less taxes we will ask the French to pay. The ideal would be not to raise any tax rate on households in 2014. On VAT, we have already voted an increase to 20 percent for the normal rate.... We will not go any further.'
ON RELATIONS WITH GERMANY
'France and Germany must lead the others. The first thing we must do each time, and what we have done over the last year, is to try to find compromises between France and Germany. With Mme. Merkel we have tried at each point and been able to do it'
ON ECB POLICY
'It's has already cut its interest rates to a very low level, so we can't ask it to do more... But it can create more liquidity.'
ON BRITAIN AND THE EU
'I want the euro zone to make progress, because it is the heart, because we have integration to carry out. I understand that there are countries that don't want to join the euro, but they cannot stop the consolidation of the euro zone. If they want to go further..., the risk is that we will have a break up of Europe. So there are limits to be set.'
(Reporting by Leigh Thomas and Nicholas Vinocur) Keywords: FRANCE HOLLANDE/
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