With France and with Germany leading the way of Europe’s economic recovery, President Nicolas Sarkozy has both the power and the prestige to launch a reinvigorated campaign against what he calls the “freewheeling Anglo-Saxon” model of finance.
With his countryman Jean-Claude Trichet heading the European Central Bank and UMP ally Michel Barnier soon to be installed as the EU’s internal market commissioner, Sarkozy appears to have everything in place to make the world see “the victory of the European model, which has nothing to do with the excesses of financial capitalism.”
No wonder people are worried in the City of London.
London was quick to respond. Mayor Boris Johnson traveled to Brussels to lecture the European Parliament, but his entourage of rabble-rousers and cameramen did little to persuade them.
Nor was Chancellor of the Exchequer Alistair Darling’s argument that “London is New York’s only rival as a truly global financial center,” and therefore Europe should strengthen, not weaken it, well received.
Earlier, in conference with his colleagues from across the continent, Darling compromised on the creation of a European financial regulator. French finance minister Christine Lagarde praised the deal, which according to Darling leaves considerable responsibility with national authorities.
That is not how his counterparts sold the agreement at home.
Nevertheless, there is truth in Darling’s statement. A European Systemic Risk Board is to be put in place to spot irregularities in the financial system, but it will have no power force banks to end questionable practices. It will issue recommendations and warnings.
Sarkozy has more weapons in store to bombard Paris to the world’s next financial capital. A European Alternative Investment Directive would install a framework for all alternative fund managers, which in London is seen as an attempt to shackle another sector of “freewheeling Anglo-Saxon” capitalism.
If that is the case, Paris could gain little. Hedgefunds taking a preemptive decision to leave London headed for Switzerland, not Paris or Frankfurt.
There is more reason for Londoners to be hopeful. As Ambrose Evans-Pritchard writes in the Telegraph, Barnier is “deeply averse to trampling on British sensitivities.” His director-general, Jonathan Faull, is British.
Given the circumstances, the Barnier-Faull team is the best that Britain could hope for.
Whether that will stop Sarkozy remains to be seen.