Blair rejects Jospin's EU tax plan

Blair: "We don't agree"

LONDON, England (CNN) -- British Prime Minister Tony Blair has rejected his French counterpart's prediction of harmonised corporate taxation in Europe.

French Prime Minister Lionel Jospin made the call in a keynote speech on the future state of Europe.

Jospin said unfair competition between national tax regimes was "unacceptable" and that harmonising corporate taxation would eventually be necessary.

However, Blair, campaigning ahead of the British general election on June 7, told reporters: "We don't agree with tax harmonisation across Europe.

"Unfair tax competition is another matter, however. That prevents the single market working properly.

AUDIO CNN's Robin Oakley: The future shape of Europe is a hot topic 418K/38 sec. AIFF or WAV sound CNN's Peter Humi on the highlights of Jospin's keynote speech 628K/58 sec. AIFF or WAV sound     RESOURCE Europe's future: Key leaders' views

"We have won the argument on tax harmonisation every time it has been raised in Europe."

In his speech at the foreign press club on Monday, Jospin said:"It is not acceptable that certain member states indulge in underhand competition to attract international investment and entice European companies to relocate their headquarters."

While having no immediate comment on other issues raised in Jospin's speech, Blair said: "The most important thing, however, is for Britain not to end up separating ourselves from Europe or losing influence in Europe in circumstances where 60 percent of our trade is with Europe and millions of jobs depend on it."

Jospin had rejected a call by Germany for a more federal Europe, saying nations should remain as decision-makers in the 15-member bloc.

German Chancellor Gerhard Schroeder recently suggested that the European Union Council of Ministers would be turned into a chamber of the European Parliament -- a plan that Jospin described as unacceptable.

"France, like other European nations, could not accept such a statute nor such a concept of what a federation is," he said in a speech to the foreign press club in Paris.

"I am in favour of Europe but I remain attached to my nation," he said.

The German government welcomed debate on the suggestions, but declined to comment further.

"There is a lively discussion under way that is meaningful and fruitful for the future of Europe," government spokesman Uwe-Karsten Heye told a regular news conference in Berlin.

Jospin: "I remain attached to my nation"

Heye said Berlin would study the speech closely and it would be discussed at the bilateral meetings French and German leaders hold about every six weeks to patch up ties after the tense European Union summit in Nice in December.

"This can certainly be deepened in the confidential and trustful talks that are under way between the two governments and in this way there are bases in the speech that can be fruitful for the post-Nice process," Heye said.

Jospin backed the idea of a European "federation of nation states" originally put forward by fellow French Socialist and former European Commission chief Jacques Delors.

"Co-operation between governments still plays an important role and will remain indispensable," said Jospin.

"I do not separate France from Europe," Jospin said.

Jospin said the German vision of federation was "strongly inspired" by Germany's own political system and "would gain its legitimacy solely from the European Parliament."

"France, just like other European nations, cannot accept such a statute or such a concept of federation," he said.

Regarding the euro, Jospin said Europe should create an "economic government" with a fund to help euro zone economies if they get into difficulty.

"For two years, the euro has acted as a shield against international financial crises and competitive devaluations," he said.

"We now need an economic government for the euro zone."

"Let us create an economic action fund to which each country would have access and which could be used to support any country hit by world economic turmoil."

A "European social treaty" was also necessary, with labour rules on layoffs, wage policy and the quality of employment, he said.