Nicolas Sarkozy has pulled off another small Euro-coup while accompanying his Finance Minister to the meeting of European Finance Ministers in Brussels. He is the first head of state ever to invite himself to this key European Union event. A disgruntled British official asked, “Is he going to do everything himself?” The answer would seem to be “yes” if that is what he thinks is necessary. In a two-edged message before leaving France he told his ministers that the deficit must be reduced, not because France has European commitments, but because it is weighing on the growth and confidence of the French – Gaullism with a European face or Europeanism with a Gaullist face?
On the face of it, he was there to justify the warning given by his Prime Minister François Fillon that France would not balance its budget until 2012, rather than the 2010 promised by his predecessors. He said: “I owe it to myself to be realistic and open. If growth is higher than expected then 2010 will be achieved" – meaning that if his attempt to shock the French economy into growth works straight away that will happen. If not…
The reception was chilly but Sarkozy wrong-footed the assembled ministers by happily promising that all unexpected receipts would go to reduce the deficit rather than on current expenditure, causing Euro chief Jean-Claude Juncker to observe euphorically: “We say yes to this ambitious programme of structural economic reform in France. It is good news for Europe. France will never again be the country characterised by failure to reform.” A spokesman said that the European Commission was satisfied with the French proposals: “ We got more than we expected.” A diplomat commented that the French had had to modify their demands, although it is more likely that in reality their tactic was to raise unfavourable expectations to make the financial pill easier to swallow. At the press conference after the meeting, Sarkozy said, “I do not ask for delay to put off controlling public finances but with a view to a dynamic and intelligent application of the Stability Pact.” This was a gentle reminder that what he was asking for was permitted within the revised rules of the Stability Pact which aims to keep individual governments in line in support of the euro.
There was increased tension at the meeting because the new French President has made no secret of the fact that he believes that economic management is too important to be left to bankers, financial experts and mere finance ministers. He has for a long time maintained that the key financial decisions about the euro should take account of political needs and not just a stable currency. This has caused tension with the Germans, in particular. Andreas Schockenhoff, chairman of the Franco-German parliamentary group in the Bundestag, said that price stability was crucial for economic growth. "France cannot question that point." This is precisely what Sarkozy is doing.
The head of the European Central Bank Frenchman Jean-Claude Trichet has also made his displeasure known, claiming that the recent fall in unemployment was due to the stable euro. As Sarkozy rushed off to give impetus to his planned Mediterranean association at meetings in Algiers and Tunis, he commented, “I briefly discussed monetary policy with my friend Jean-Claude Trichet; we are not exactly on the same wave length.” While in Brussels, the French President rounded off another tour de force by rallying the bulk of the EU members behind Dominique Strauss-Kahn, the French candidate to succeed Spaniard Rodrigo Rato as the new President of the International Monetary Fund. For the first time the fund’s governing body has said that its new chief may come from any nation, not just Europe as in the past. Even so DSK’s chances look good.
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