"I am advocating that we prepare a European growth initiative in addition to the agreements on budget discipline," Barnier told Germany's Die Welt newspaper in an interview published on Monday.

Such an initiative would include, in the short term, increased funding for the European Investment Bank (EIB), more effective use of European Union structural funds and also 'project bonds' to fund infrastructure, Barnier said.

Francois Hollande, the socialist tipped to win the French presidency in next weekend's runoff vote, has pushed strongly for measures to stimulate Europe's flagging economy and has criticized the current German-inspired emphasis on budget cuts.

In a nod to Paris, German Chancellor Angela Merkel also called at the weekend for a bigger EIB role to help spur growth, though Berlin remains more skeptical that 'project bonds' promoting infrastructure investment would help turn around weak southern European economies.

Barnier said a further opening up of the EU's internal market could help to underpin growth in the medium term.

"In the long term I would like a European industrial policy in strategic areas so that we become again a manufacturing base and not just a consumer of American and Chinese products," added Barnier, a centre-right French politician.

The dilemma of how to boost growth and employment while cutting debt is set to dominate a summit of EU leaders in June.

(Reporting by Gareth Jones)

• A Permanent Economic Emergency