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Harper urges firm action on euro zone debt crisis

French President Francois Hollande, left, welcomes Prime Minister Stephen Harper upon his arrival at the Elysee Palace in Paris on Thursday.

Francois Mori/Associated Press

Prime Minister Stephen Harper and German Chancellor Angela Merkel were singing from the same songbook Thursday, calling for a stronger union to quell the unrest in the troubled euro zone.

Mr. Harper, in France to meet the country's new Socialist leader, called the 17-country euro zone a "half-done project" that lacks the tools to contain Europe's spiralling debt crisis.

"The problem here is we have a monetary union, but the European Union and the euro zone lack the strong institutional structures that normally go with a monetary union," the prime minister told reporters.

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"They don't have the kind of central bank authority that a monetary union usually has, they don't have the kind of banking regulatory authorities that you usually see with a monetary union and they don't have a strong central government with a kind of dominant fiscal policy that you normally have with a monetary union."

Ms. Merkel is also calling for countries to gradually give up more powers to Europe, saying a "political union" is needed.

"We need not just a currency union; we also need a so-called fiscal union, more common budget policies. And we need above all a political union," she said Thursday when she appeared on a televised breakfast show.

"That means that we must, step by step as things go forward, give up powers to Europe as well."

Ms. Merkel, who has faced criticism for focusing on austerity as a cure to Europe's financial woes, insisted anew that she is interested in growth, but that "budget consolidation and growth are two sides of one and the same coin."

The calls for greater cohesion come as trouble brews in Spain's banking system and concern grows over Greece's future in the euro zone.

Mr. Harper says European leaders need to come up with a plan -- and soon.

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"They're not going to have growth in Europe unless they establish some confidence in markets," Mr. Harper said.

"And it's going to be very difficult to establish confidence without a plan to address some of these issues."

Mr. Harper said he stressed the need for quick action over breakfast Thursday with French President Francois Hollande.

The meeting came a day after Mr. Hollande's Socialist government lowered the retirement age for certain workers to 60 years old from 62, bucking a trend in Canada and other European countries, which are pushing retirement ages higher.

Mr. Harper's Conservative government plans to postpone Old Age Security payments to 67 from 65, although the changes won't start to take effect until 2023.

The French government, on the other hand, plans to act more quickly with its changes. The cost of shaving two years off the retirement age is estimated to cost €1.1-billion next year.

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That figure is expected to rise to €3-billion by 2017, but critics say the cost will actually be much higher.

France plans to pay for the move by a small rise in payroll charges paid by employers and employees.

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