Tag Archives: Sarkozy

European Nations Struggle to Address Financial Crisis


05 October 2008

Governments across Europe are scrambling to save failing banks Sunday, a day after European leaders called for a more coordinated response to the global financial crisis.

In Germany today, government and business leaders met to discuss efforts to save the troubled commercial property lender, Hypo Real Estate AG.  A $48 billion rescue plan to salvage the German company fell through Saturday.

German Chancellor Angela Merkel said officials are working hard to secure the lending company.  She said Berlin will not allow the distress of one financial institution to distress the entire system.

In Belgium, financial officials struggled to find a buyer for Fortis, a Belgian and Dutch banking and insurance group.  The Netherlands recently nationalized the group’s Dutch operations.

French President Nicolas Sarkozy (l), and the head of the International Monetary Fund Dominique Strauss-Kahn following their meeting at the Elysee Palace in Paris, 04 Oct 2008

The leaders of France, Britain, Germany and Italy met Saturday in Paris and agreed to sign a formal pact to support their individual banking sectors.

Europe’s financial system has been hard hit by the U.S. economic crisis.

In the United States, banking giant Citigroup announced today that a judge has agreed to temporarily block the sale of troubled Wachovia Bank to rival Wells Fargo Bank.  Citigroup says the deal violates an earlier agreement it had reached to take over Wachovia.

U.S. lawmakers approved $700 billion financial bailout plan on Friday.  The plan allows the U.S. government to buy failing investments from troubled financial companies in an effort to restore lender and investor confidence, and to restart economic growth.

London: Sarkozy seeks to moralize capitalism

Commentary by Herbert London

In a recent Le Figaro report Nicolas Sarkozy said, “At the end of the French presidency, my aim is that [Europe] will have moved towards a common immigration policy, a common defense policy, a common energy policy, and a common environment policy.”   He noted, “The citizens of all of Europe demand protection; they want Europe to protect them, not make them vulnerable.  They want it to allow them to act, not oblige them to suffer.”

President Sarkozy goes on to contend that this “protective Europe” is incompatible with “the excesses of financial capitalism.”  He maintains that France under his guidance will take initiatives “to moralize capitalism.”  As part of his vision Europe is to be seen for “community preference” and to make matters perfectly clear President Sarkozy has called on the government backed Caisse des Dépôts et Consignations bank to take the lead in protecting France from the “power of extremely aggressive sovereign funds.” 

How does one parse the ambiguous phrases?  Is European immigration policy, to cite one example, going down a path taken by France in which more than a quarter of Marseille residents are Muslim and unrest now characterizes urban life in this once peaceful city?  What does Sarkozy mean by a common environmental policy?  Are European nations about to embrace a common carbon footprint?  And if so, will such regulation be enforced by bureaucrats in Brussels?

Perhaps the most interesting and often-heard expression used by Sarkozy is “moralizing capitalism.”  For years European leaders have been decrying “the inhuman dimensions of Anglo-Saxon capitalism”—code words for the free market.  Sarkozy is merely following the rhetorical lead of his predecessors.

However, in his desire to place strict controls on sovereign investment he may be inhibiting cash-starved industries and corporations and, in the process, restricting innovation Europe needs to be competitive.  If moralizing capitalism means protective regulation that keeps union control over the labor market, stagnation is the inevitable result.  It has been demonstrated in France and elsewhere in Western Europe that if you cannot fire, you cannot hire, a condition that has led Europeans to envy the relatively low unemployment rate in the United States.

Clearly Europe has benefited from Arab capital that has gravitated north in search of investment opportunity.  This condition aimed in part as punishment for American Middle East policy, has bolstered the euro against the dollar and, to a modest degree, has had a salutary influence on European economies.

But in actuality Europe’s industries are largely moribund.  They cannot compete against Asian markets and often demand protection against the economic onslaught.  The unfunded liability due to cradle to grave security—even with recent modifications in outlook—is daunting.

As a consequence, the Sarkozy proposal to moralize capitalism—which has the ring of human decency to it—is catastrophic for a Europe that suffers from economic sclerosis.  If anything, France and Western Europe desperately require a shot of adrenalin in the form of free market initiatives.

Clearly Europeans have a preference for security, long vacations, short work weeks and reduced competition.  However, Europeans are not alone in the world.  The intrusion of other markets is a reality and the interest of competitiveness will have to be assuaged. 

While Sarkozy’s pro-American foreign policy stance is justifiably applauded, his European economic position is hopelessly predictable and doomed to fail.  Perhaps as a member of the EU in good standing, he, as the leader of France, is obliged to repeat standard European slogans.  But these are empty slogans that if enacted into policies will further weaken Europe economically and make it less likely the continent will assume the defense responsibility to which is so often gives lip-service.

Sarkozy has enjoyed a honeymoon period with American leaders, but his platitudinous economic position should offer a moment of reflection.  Are we merely hearing much of the bankrupt moralizing of the recent past—an echo of Chirac?  That is the most likely conclusion to be reached from his remarks.

 

 -Herb London is president of the Hudson Institute and a member of Insight’s Editorial Advisory Board.