Francois Hollande threatens to block eurozone's new financial treaty

The new French president wants the treaty, seen as crucial to ensuring the survival of the single currency, to focus more on encouraging growth.

Angela Merkel, the German chancellor, on Thursday told France that there was no alternative to spending cuts and painful deficit cutting measures, warning that "growth through debt" would take Europe back to square one.

But Benoît Hamon, spokesman for Mr Hollande's Socialist Party, said that the "politics of austerity" was failing to improve the continent's financial crisis.

He said the French president was determined to win a "trial of strength" over the new fiscal pact, which aims to impose tough budgetary discipline on the 25 European Union countries who have signed up.

"We want to renegotiate. Angela Merkel is defending her position but she cannot bypass the will of the French people," Mr Hamon said. "If nothing moves, the treaty will not be submitted for ratification."

Mrs Merkel delivered a blunt message of her own however, telling France and Greece not to abandon debt cutting policies in the wake of elections at the weekend that saw both countries turn against the path of austerity.

"The European sovereign debt crisis will not be beaten overnight, there is no magic bullet," she said. "Growth through structural reform is important and necessary. Growth through debt would throw us back to the beginning of the crisis."

Mr Hollande will meet Mrs Merkel for the first time since becoming French president next Tuesday when he travels to Germany just hours after his inauguration. There he will press his demand for a greater focus on growth over dinner in the Chancery.

In a rare ray of light, the first hopes of a coalition government forming in Greece emerged last night after the leaders of two socialist parties said they would work together in order to keep the country in the euro.

After three days of stalemate Evangelos Venizelos, leader of Pasok, said that he saw the first "good omen" in attempts to forge a government that would avert the looming prospect of a new election.

He spoke after meeting Fotis Kouvelis, leader of Democratic Left, who outlined a proposal for a unity government until 2014 that would strive to keep the heavily indebted country in the euro and the European Union, while negotiating a gradual "disengagement" from the harshest austerity measures of the 130 billion euro.


The Telegraph