French president François Hollande's governing Socialist party has delivered a blistering assault on Germany's chancellor, Angela Merkel, accusing her of causing the single currency crisis that has been tearing Europe apart for more than three years, of acting selfishly and intransigently in her own political and German national interest, and demanding a "showdown" with the "chancellor of austerity".

The French socialists' criticisms, in a draft paper on party policy on Europe ahead of a conference in June, came as Spain dramatically shifted its commitment to austerity. Spain set a far higher budget deficit target for this year while admitting that the country's chronic unemployment would stay above 25% for the next four years.

The new budget deficit target, increased from 4.5% to 6.3%, means Spain only has to reduce spending by 0.8% of GDP over this year. But greater realism about its ongoing recession saw the government admit the economy would shrink by a further 1.3% this year.

The Spanish government has put back the target of reaching the Brussels-mandated deficit level of less than 3% until 2016, a move that will see public debt grow to 100% of GDP.

The French socialists' draft paper contends that Europe is being run by a rightwing Anglo-German cabal dominated by liberal free trade interests with the rest of the world and austerity within the EU.

It calls into question the Franco-German alliance that has been at the heart of the EU for as long as it has existed and argues that France alone of the big EU countries has a government that is genuinely pro-European.

Merkel, as well as Hollande's predecessor, Nicolas Sarkozy, and David Cameron come in for severe criticism. Merkel and Sarkozy, the draft declares, managed to turn a small crisis that started in Greece more than three years ago into a European disaster.

The 21-page draft was leaked to Le Monde, which said it had the tacit support of Hollande's government. It said: "The [EU] community project is now scarred by an alliance of convenience between the Thatcherite accents of the current British prime minister – who sees Europe only as à la carte and about rebates – and the selfish intransigence of Chancellor Merkel who thinks of nothing else but the savings of depositors in Germany, the trade balance recorded in Berlin and her electoral future."

The paper reveals just how bad relations have become between Berlin and Paris, with Germany alarmed at the condition of the French economy and frustrated that Hollande appears unwilling to embark on the kind of radical structural reforms the Germans think are necessary.

Hollande's predecessor, Nicolas Sarkozy, also faced severe criticism. Photograph: Charles Platiau/Reuters

The document also calls bluntly for an end to austerity as the main response to the debt and currency crisis, accuses the political right dominating EU politics as being focused on "deregulation, deindustrialisation and disintegration".

Spain's move to ease its deficit burden was praised by the European commission in Brussels in what is a clear sign that it, too, has radically changed its previously hawkish insistence on harsh austerity.

It said in a statement: "Regarding the fiscal targets, the postponement of the correction of the excessive deficit (to below 3% of GDP) to 2016 is consistent with the current technical analysis by the commission services of what would be a balanced – but still ambitious – fiscal consolidation path, given the difficult economic environment."

The Spanish finance minister, Luis de Guindos, insisted that, despite continued recession and 27% unemployment, Spain was turning the corner and that last year's intense austerity measures - which helped tip a further 600,000 Spaniards into unemployment – had been worth the effort. "The results have not been good but they could have been much worse," he said.

However, the government said it would still have to raise taxes to meet the new deficit targets. The budget minister, Cristóbal Montoro, pledged no rises in VAT, income tax or fuel taxes, but said other special taxes would rise. He refused to say which ones they were.

Company taxes will also rise and a small tax on banks, based on their deposits, is to be introduced.

The prime minister, Mariano Rajoy, continued his tradition of avoiding the press and public when major announcements on the economy are made, and left ministers to present the changes.