Entering his fourth year in office, French president Nicolas Sarkozy has to cope with a public increasingly wary of his policies and political challenges from within his own party.
Sarkozy was elected in 2007 with some 53 percent of the vote, in part because he campaigned to strengthen internal security.
The capital of Paris had witnessed a string of violent incidents in its banlieues just two years prior. Pressured by the rising popularity of France’s xenophobic National Front, the conservative Union pour un mouvement populaire (UMP) adopted a more assertive stance on immigration under Sarkozy’s leadership.
In recent weeks, that position has backfired. Read more “Sarkozy’s Tough Reelection Prospects”
France and Germany have insisted that the European Union speed up its scheduled financial reforms, noting that “strong volatility” in the markets necessitates a quick ban on speculative trading against “certain” stock and government bonds.
In a joint appeal, French president Nicolas Sarkozy and German chancellor Angela Merkel called on European Commission President José Barroso to propose European legislation by the middle of next month instead of this fall. A EU spokeswoman promised on Wednesday that the commission would make proposals to regulate short selling “during the summer.”
Germany startled markets last month when it abruptly banned naked short selling of eurozone government debt and financial stock, as well as naked credit default swaps involving eurozone debt which are blamed by some for deepening Europe’s ongoing debt crisis.
Merkel and Sarkozy wrote to Barroso on Tuesday that “the severe turbulence observed on financial markets over recent months has […] led to considerable concern among the member states of the European Union and all our fellow citizens.” They added that “the return of high market volatility raises some legitimate questions, specifically concerning certain financial techniques and the use of certain derivative products, as, for example, short selling and credit default swaps.”
The Commission should consider the possibility “of European harmonization of the time allowed for securities settlement and delivery relating to trading on European markets,” both leaders agreed.
Other EU member states have previously been reluctant to follow Germany’s lead, France among them. President Sarkozy has pushed for greater market regulation but prefers European measures over unilateral action. The government leaders of Europe’s two largest economies have now agreed to work more “closely together,” according to Chancellor Merkel’s office. They will prepare together for the upcoming EU summit of June 17 and subsequent G20 gathering in Canada. Europe’s sovereign debt crisis and the weakening of the common currency will likely dominate both meetings.
Last week, Commission President Barroso stressed that European governments ought to “deliver a strong and unified position” on financial reform before the upcoming G20 summit.
The Parti socialiste won France’s second round of regional elections conclusively this Sunday, gathering over half the votes nationwide while President Nicolas Sarkozy’s conservatives trailed in second place with just a third of the electorate.
The socialists already controlled twenty out of France’s 22 departments in Europe, gaining the island of Corsica this weekend. The major parties equally split the four overseas regions.
Following their defeat in the 2007 election, the socialists were ruptured for years with internal power struggle. Former presidential candidate Ségolène Royal had to make way for the Parisian Martine Aubry last year in an extremely close election that saw Aubry lead with just over a hundred votes.
Aubry is the daughter of former European Commission chairman Jacques Delors and previously served as labor minister when she championed the 35-hour workweek. She is expected to run against Sarkozy in the country’s upcoming presidential election of 2012.
Although the government previously insisted that the elections would bear no consequences nationally, rumors of a cabinet shakeup being in the works began circulating in Paris right after the outcome of the election became known. Prime Minister François Fillon accepted defeat and declared that his party has to listen to the voters.
In the wake of the financial meltdown, President Sarkozy has shown himself increasingly leftish on the economic front, blaming the “freewheeling” Anglo-Saxon mode of enterprise while leading the fight for greater European and global regulation of the financial industry.
At the same time, France has to make unpopular cutbacks. Sarkozy’s government is likely to cut on entitlement spending and it intends to raise the retirement age. Labor unions and farmers are already gearing up to protest against the measures, foreboding months of uproar in a country that simply can’t afford to maintain its massive and pervasive welfare state for much longer.
Government intervention in the economy is something of a tradition in France. As the the 2010 Index of Economic Freedom published by the Washington-based Heritage Foundation and The Wall Street Journal noted, French business “remains curtailed by the pervasive presence of the state in economic activity.” Government spends more than half of GDP and owns or controls many major industries. Taxes are high and so is the state’s expenditure. Indeed, few states spend more than France.
Since the recession struck, President Nicolas Sarkozy, although the foreman of France’s political right, has shown little love for free-market capitalism. He previously blamed the “freewheeling Anglo-Saxon” model of finance for today’s trouble and announced “the victory of the European model.” Sarkonomics have been disappointing for aficionados of the market.
“If there was any remaining doubt that the era of financial capitalism is over and the age of big government has begun,” writes Rana Foroohar for Newsweek, “Sarkozy dispelled it” with his keynote address to the World Economic Forum in Davos, Switzerland last Wednesday. He “seemed to delight in bashing everything from laissez-faire capitalism to overblown banker pay,” according to Foroohar, and he complained that “nothing has gone to labor” during the past years. In Sarkozy’s words, “Capitalism is not an end — it should be a means to an end.” What end? Sarkozy didn’t say.
This sort of vague persecution of capitalism is unfortunate when it is practiced by opinion makers. Coming from a world leader, it is dangerous.
Sarkozy never explains how exactly capitalism failed besides pointing at high bonuses and blaming the short term vision of bankers. He never provides a viable alternative besides promising to “do something” for “labor”. Yet he has enacted greater protectionism of French industry and proposed greater oversight of the financial sector, all intended to curtail capitalism, not do away with it altogether, of course.
The truth is that by curtailing capitalism, it seizes to function. Financial markets have been subject to regulation for years. Their failure is interpreted as proof that more oversight is necessary but more of the same won’t do any good. Punishing banks won’t work.
French president Nicholas Sarkozy is quite possibly the greatest of European leaders today. He has regained for his country a preeminent position within the European Union and took little time to repair the transatlantic discord that so disturbed French foreign policy since the start of the Iraq War in 2003. On the economic front however, his achievements are less impressive.
Although foreman of France’s right-wing, Sarkozy has displayed little love for free-market economics since the recession struck almost two years ago. Indeed, he blames the “freewheeling Anglo-Saxon” model for today’s trouble and hopes to demonstrate “the victory of the European model” — which, probably, means the victory of the French model in his view.
France has comfortably overcome the townturn thanks to that model: the country has a huge public sector that currently employs about one in every five workers. Besides, Sarkozy has shown himself willing to protect the French private sector also, demanding, for instance, that automaker Renault create jobs at home in exchange for stimulus funding. The relative lack of unemployment comes at a cost though: the public debt has naturally skyrocketed while Paris maintains an 8.5 percent deficit on the budget. That in spite of demands from Brussels that it be cut to 3 percent in accordance with European regulation.
Sarkozy then turns out to be something of an old-fashioned Frenchmen after all. That is not to say that he isn’t refreshing at all. Abroad, the president has persued an intelligent and most successful foreign policy while at home, he has fulfilled many of his campaign promises, although not always with the most stunning of results. His large-scale effort to cut on public expenditure for example has been practically brought to a standstill since the first signs of economic anxiety became apparent.
In Newsweek Tracy McNicoll concludes that Sarkozy really has no economic principles. “Sarkozy has the flexibility to win battles but not the single-minded vision to define or win a war, as Ronald Reagan or Margaret Thatcher did.” Perhaps. Then again, flexibility alone seems a lot to be grateful for these days.
With France, along with Germany, leading the way of European 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 union’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 that 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 some truth in Darling’s statement. A European Systemic Risk Board is to be put in place to spot irregularities in the financial system that threaten to harm it. But it will have no power to leap upon banks to put any questionable practices to a halt. Rather it is supposed to issue recommendations and warnings alone.
Sarkozy has more weapons in store to bombard Paris to the world’s next financial capital however. A European Alternative Investment Directive seeks to install a framework for all alternative fund managers which in London is rather perceived as an attempt to shackle another sector of “freewheeling Anglo-Saxon” capitalism. If that were true, Paris in fact stands to gain very little: hedge funds taking a pre-emptive decision to leave London headed straight for Switzerland, not Paris or Frankfurt.
There is more reason for Londoners to be hopeful. As Ambrose Evans-Pritchard notes in the Telegraph, Barnier is actually “deeply averse to trampling on British sensitivities.” Moreover, 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.