* EU veteran to propose new approach to revive single market
* Monti sees link between threats to EU market, currency
* Grand bargain would make tax, social concessions to France
* Proposal designed to counter "market fatigue" in EU public
By Paul Taylor DUBLIN, May 9 (Reuters) - European Union elder statesman Mario Monti will propose a grand bargain on Monday to reverse an erosion of the bloc's single market due to the financial crisis that is now shaking the euro common currency.
The internal market of nearly 500 million consumers, built on the principle of free movement of capital, goods, people and services, is the cornerstone of EU prosperity. But economic nationalism and emergency rescue measures taken since 2008 to protect banks and car makers risk undermining it.
European Commission President Jose Manuel Barroso mandated the respected former EU competition and internal market chief last year to devise a strategy to relaunch the single market and build a new consensus for a competitive economy.
Monti will hand his report to Barroso on Monday and it is still under wraps. But in a series of speeches and articles, he has sketched the outlines of a "package deal" of reciprocal concessions by the EU's free marketeers and more socially-minded countries such as France and Germany.
In exchange for greater cooperation on tax policy, workers' rights, public services and industrial policy, he argues, Paris and Berlin would be more willing to open their energy, telecoms and services markets to more cross-border competition.
In a nod to the American revolution slogan, he says the EU should embrace the idea of "no taxation without coordination". He does not advocate tax harmonisation, anathema to Britain, Ireland and east European states with low corporate taxes.
Exactly 25 years after Jacques Delors launched a landmark programme to complete the single market that dragged the EU out of a period of "Euroscelerosis", Monti suggests using similar methods to help revive a battered European economy.
Fast-track legislation, majority voting by EU ministers on new market liberalisation and swifter enforcement of the rules by the European Commission would help sweep away obstacles to competition, innovation and growth.
"MARKET FATIGUE"
EU efforts to extend and streamline the internal market in the last decade have ended in failure on takeover rules and a single European patent, or been severely watered down on opening up the cross-border market for services and energy.
Left-wing, trade union and nationalist opposition to what French President Nicolas Sarkozy has derided as "the dogma of unfettered competition" was driven by a perception that it undercut workers' rights and social protection.
Fear of low-paid Polish plumbers taking French jobs was a major factor in French voters' rejection of an EU constitution in a 2005 referendum.
Monti sees Europe today as gripped by "market fatigue" as well as "integration fatigue", with public support for free markets ebbing in western Europe due to unemployment and the discrediting of financial capitalism in the credit crisis.
His recommendations risk being drowned out by the immediate clamour to stabilise the euro and prevent Greece's debt crisis from engulfing other countries in the single currency area.
But Monti argues that the single currency and the single market are two sides of the same coin. Greece's fiscal woes are rooted in its failure to develop a competitive economy due to domestic barriers to competition that protect vested interests in the public and private sectors. Other countries suffer a similar handicap, he argues, including his native Italy.
In his quest for new political impetus, Monti recently urged Poland, the largest of the new central European members, to make relaunching the single market a key plank of its EU presidency next year, and France to champion it in its drive for greater economic governance when it chairs the G8 and G20 in 2011. (editing by Myra MacDonald)