By James Mackenzie
ROME (Reuters) - European center-left parties called on Saturday for a change to austerity policies enacted to counter the euro zone crisis as they named Martin Schulz to be their candidate for next head of the European Commission.
The Party of European Socialists (PES), which groups Europe's main center-left parties, said the focus on tight budgetary policy during the crisis had resulted in mass unemployment, hardship and the rise of populist movements.
The euro zone is gradually recovering from its worst economic crisis since the launch of the single currency but its southern members continue to struggle and youth unemployment remains above 40 percent in Greece, Spain and Italy.
"Europe can't continue like this," French Prime Minister Jean-Marc Ayrault told reporters at a special PES congress in Rome held to launch the joint platform for the European parliamentary elections on May 22-25.
"You can see populist parties on the rise everywhere and if they succeed in the European elections, they will be able to block a reorientation of Europe."
The PES called for measures to relaunch the continent's sickly economy, create jobs and help the unemployed and others who had suffered in the crisis. Several speakers called for tighter regulation of financial markets blamed for the crisis.
Schulz, a German Social Democrat and current president of the European Parliament, said Europe should do more to help small businesses and reconnect with its citizens and could not allow policy to be exclusively dictated by financial markets.
"For too long, we have been told that the invisible hand regulates markets, that we cannot control financial markets. We can and we must," he said in a speech accepting the nomination which the center-left hopes will see him take over from the current center-right president Jose-Manuel Barroso.
He promised a crack-down on rules that let big companies shift tax payments across national borders to cut their tax bills and said he would make a bill of digital rights a priority in the wake of the scandal over intelligence agencies scooping up vast quantities of online data.
Opinion polls suggest that the center-left will do well in the elections, gaining ground from the center-right which has dominated European policy making for the past decade.
However even if they gain the most seats in the 751-seat European parliament, the Commission president is not directly elected and the center-left candidate will not necessarily win office, with backroom negotiations with national governments certain to play a big part in the appointment.
The conference heard calls for ideas ranging from a financial transaction tax to pay for measures to cut youth unemployment to more investment in science and research and a more appealing message to voters.
German Social Democratic leader Sigmar Gabriel, economy minister in Chancellor Angela Merkel's cross-party coalition, said it was unreasonable to expect small business and skilled tradesmen to accept heavy tax burdens while financial markets -- which he said had caused the crisis -- "have not paid a cent".
"We have to get a contribution from the financial markets. We have to get to them, to finance a cut in debt and an investment in growth," he said.
However, although there were widespread calls for more spending on training and policy measures to create jobs, most speakers took pains to stress the importance of sound public finances as well.
Italy's new Prime Minister Matteo Renzi repeated a pledge to keep finances under control, saying this would allow his country to press for growth-oriented policies when it assumes the rotating presidency of the European Union in July.
"Certainly, to be in a position to do this, Italy has to fulfill its own obligations. But we want to get our public finances in order not because international institutions are asking for it but because our own dignity and our children require it," he said.
However he left it unclear whether he would seek extra flexibility from the current rigid caps on budget deficits, as he indicated before taking office.
In his first speech as prime minister before an international audience Renzi, who leads a coalition with small centrist and center-right groups, said red tape must be cut to create "a Europe for citizens, not for bureaucrats."
Renzi's party, the center-left Democratic Party, formally joined the PES after a vote by its leadership this week.
(Reporting By James Mackenzie; Editing by Tom Heneghan)