Hollande set for royalty and wrangles on British visit

French President Francois Hollande will hold potentially combustible talks with Prime Minister David Cameron on Tuesday before meeting with Queen Elizabeth II during a one-day visit to Britain.

Splits over City regulation, the Euro crisis and high-income taxation are set to dominate the talks with Cameron, who apparently snubbed Hollande when he made an election-campaign visit to London in February.

The pair held their first bilateral meeting before the G8 summit in Washington in May, and Cameron's Downing Street office insisted the two would also discuss more consensual issues during Tuesday's 90-minute working lunch.

"The agenda will focus on the range of bilateral issues," said a Downing Street spokesman.

"I would expect them to cover the economy, the situation in the eurozone, a number of foreign policy issues and our ongoing cooperation on defence."

Cameron raised French hackles last month when he made a controversial promise to "roll out the red carpet" for any French tax exiles.

Britain later insisted the comment was meant to be taken in jest, and the French leader shrugged off the comments as "of no importance".

Taxation in France, however, is also being closely scrutinized by the British government on another point: a proposed hike in the levy on foreign-owned second homes.

According to the Daily Telegraph, this measure could affect "some 200,000 British second-home owners in France", and London would be willing to "challenge any proposal which breaches European single market laws and anti-discrimination rules."

Downing Street refused to comment on whether the matter would be on Tuesday's agenda.

European issues are also likely reveal differences of opinion between Conservative Cameron and Socialist Hollande, who came to power in May.

Cameron continues to urge members of the eurozone -- of which Britain is not a part -- to take action to resolve the economic crisis that is severely affecting his country's economy.

But under heavy pressure from the Eurosceptic wing of his party, he recently called for "less Europe", and has not ruled out a referendum on whether Britain should redefine its relationship with Brussels.

He also refused to back the European Pact on fiscal discipline, which he fears may compromise the City of London's position as Europe's leading financial center, and has regularly voiced his fierce opposition to a financial transactions tax (FTT) desired by Paris.

Last November, he speculated in front of Britain's parliament whether the French would accept "a tax on cheese."

Downing Street said it expected the two leaders to "cover the full range of economic issues and the situation in the eurozone" when asked if the FTT would be up for discussion on Tuesday.

"Everyone's very clear about our position on the FTT and it was discussed at the recent European Council," added the spokesman.

Hollande in May accused Britain of being "particularly shy about the issues of financial regulation, and attentive only to the interests of the City".

He also deplored London's "relative indifference" to the fate of the euro area.

"Europe is not a cash till and less still a self-service restaurant," he quipped in an apparent dig at Cameron.

In contrast, the British leader appeared to distance himself from attacks on Hollande by the conservative press by insisting there was "no contradiction between austerity and growth", a position advocated by the French president.

Hollande will later meet the queen at Windsor Castle for a 30-minute private meeting in which the monarch will speak French.

He will also meet members of the sizeable and influential French community in London.

With a French population estimated at around 350,000, the British capital is sometimes called "the sixth French city."

Hollande defeated right-winger Nicolas Sarkozy for the presidency in May and has quickly moved to cement his left-wing credentials, boosting taxes on the rich, vowing to create thousands of public sector jobs and allowing for slight spending increases.

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