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Germany must not let France break EU fiscal pact: Merkel ally

Faction leader of the liberal Free Democratic Party (FDP) Rainer Bruederle (C) reacts after his speech during a two-day party convention in
Faction leader of the liberal Free Democratic Party (FDP) Rainer Bruederle (C) reacts after his speech during a two-day party convention in

BERLIN (Reuters) - Chancellor Angela Merkel's junior coalition partner said on Sunday Germany must not allow France to break the European Union's debt rules and it warned the European Central Bank against buying up sovereign bonds in response to Italy's inconclusive election.

"The announcement of the Socialist president of France that he would take on more debt than allowed must not lead to a breach of the fiscal pact," the Free Democrats' parliamentary group chief, Rainer Bruederle, told a party convention.

"At the very least, we should not encourage France on this," he said. "We must take heed because the fiscal pact breakers are out and about once more."

France's Socialist government admitted last month that it would fail to bring its budget deficit below an EU ceiling of 3 percent of economic output this year as it had previously hoped.

Finance Minister Pierre Moscovici said France would ask its EU partners and the European Commission for an extra year to reach the 3 percent deficit goal.

Bruederle also urged the ECB against kicking off a new round of sovereign bond buying in response to last month's inconclusive Italian election that has unsettled financial markets.

"I am certain the ECB knows it cannot be the repair service for wrong election results," he said.

Bruederle, who has been chosen to head the pro-business FDP's campaign for Germany's September federal election, also echoed comments from party chairman Philipp Roesler warning against efforts to talk down the euro.

There is not a currency war yet, Bruederle said, but a deliberate policy of pursuing cheap money would only lead once again to bubbles.

"We want a strong euro," he told delegates.

France and some other euro zone states fear that a strong euro will hurt their exporters and snuff out the growth they need to create jobs and restore their public finances.

French President Francois Hollande called last month for a mid-term target for the euro exchange rate but ran into immediate opposition from Berlin.

(Reporting by Andreas Rinke and Sarah Marsh, editing by Gareth Jones and Jane Merriman)

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