Hollande warns euro strength threatens Europe's economy

Francois Hollande has issued a clear warning over the current strength of the euro damaging the European economy, calling for international action to stem currency distortions.

"The euro should not fluctuate according to the mood of the markets," the French president told the European parliament in Strasbourg. "A monetary zone must have an exchange rate policy. If not it will be subjected to an exchange rate that does not reflect the real state of the economy."

He said he was not calling for the European Central Bank to set an exchange rate target, but he demanded "an indispensable reform of [the] international monetary system".

He added: "If not we are insisting on countries making efforts to be competitive which are destroyed by the rising value of the euro."

Speaking later at a press conference, Mr Hollande said France's efforts to improve its diminished competitiveness were among those threatened. "The eurozone must, through its heads of state and government, decide on a medium-term exchange rate," he said.

"We need to act at an international level to protect our own interests," he added.

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French ministers have voiced mounting concern in recent days about the strength of the euro, which last week traded above ?1.37 to the dollar, nervous that single currency members were vulnerable to perceived deliberate moves to manipulate their currencies by countries such as Japan.

"Europe is leaving the euro vulnerable to irrational movements in one direction or the other," Mr Hollande said.

Setting out his European policy in his speech, Mr Hollande also aimed barbs at both Germany and the UK, although he was careful not to name either.

Calling for deeper "solidarity" across the EU to help weaker countries instead of "austerity without end", he said countries with "surpluses and strong competitiveness" must "stimulate internal demand to allow others to recover [economic] activity".

In a clear riposte to David Cameron, the UK prime minister, who last month called for a renegotiation of EU terms, followed by a referendum on British membership, Mr Hollande warned that "the national interest is in the process of taking the place of the European interest".

He said the EU should not be content to be simply "a market, a collection of rules" or "a sum of nations where each looks for what is good for itself and only itself".

He said: "Europe is a commitment where each accepts the equilibrium of rules and obligations and the rules are respected, where confidence creates solidarity. It is a project where you do not dispute without end the [rules] and throw everything into question at every step."