French assertiveness on credit crisis jars Europe
A spirit of cooperation is tested ahead of a crucial series of meetings to prepare for a Nov. 15 US summit.
As European leaders gather next week in a crescendo of meetings ahead of a Nov. 15 global financial summit – a "Bretton Woods II" in Washington – they face an old problem: unity.
That summit, described variously as "visionary" and "bold" under the leadership of British Prime Minister Gordon Brown and French President Nicolas Sarkozy, is designed to build on the spirit of cooperation in the rescue of world banks in the credit crisis.
As president of the European Union, and with little consultation, Sarkozy pushed economic reforms opposed by Berlin, and even hinted that France should step into key posts that govern the eurozone, and possibly even prolong its six-month EU presidency, due to end on Jan. 1.
The reaction was harsh – and prompted squabbles ahead of the Washington global summit.
With the US in a lame-duck political season, and with China unable yet to muster broad leadership, the new Bretton Woods idea, which Sarkozy urged strongly on the White House, is an opening for Europe to foster a new global model. The summit will address new standards, greater transparency, new regulation, an enhanced role for the International Monetary Fund (IMF), and even the question of climate change in a time of crisis – a veritable fireworks of reform to prevent a repeat of waves of toxic assets and undisciplined markets as well as to help emerging nations.
It is a huge agenda under the best of times, economists say. But it will require a major push from a Europe now bickering over a common script.
"The challenge is to give reality to the abstract idea of a world going multi-polar," offers Jacques Mistral, director of economic studies at the French Institute for International Relations in Paris, about the Nov. 15 summit. "For the US, China, Europe, globalization has produced some good things," he says. "It would be unfortunate to have this derailed. We need to come together. And we need to have France and Germany together to do it."
Next week, the EU has plenty of opportunity to address squabbles. On Nov. 3, the 15 finance ministers of countries in the eurozone meet in Brussels; on Nov. 4, economic heads of all the EU's 27 members will convene.
On Nov. 7, an extraordinary EU summit will hammer out positions ahead of a G-20 meeting of industrialized and emerging countries in São Paulo, Brazil, Nov. 8 – itself a stage-setter for Washington. The Nov. 15 summit includes Britain, France, Italy, and Germany for the EU, along with India, Brazil, China, Russia, Mexico, Turkey, and Saudi Arabia.
But some experts say the agenda may be too ambitious to bring major reforms.
"I am extremely skeptical about what kinds of cooperation we will get, now that the bank rescue is done," says Catherine Lubochinsky, a member of the prestigious Circle of Economists in Paris. "The rescue was extremely efficient; aiding central banks with liquidity, that's great. But I haven't seen or heard anything substantial on a new Bretton Woods, and I've been looking. There's too much to decide too quickly, and the next US president won't yet be in office."
Last weekend's Asia-Europe meeting in Beijing, billed as Round 1 on the way to Nov. 15, illustrated the difficulty of agreeing on specifics. Mr. Sarkozy and Chinese president Hu Jintao signed off on broad new rules. But Asian nations did not show a readiness to adopt essentially Western institutions – though they agree on a beefed-up IMF.
India and Brazil have reservations about a new Bretton Woods; Americans are cautious about what Sarkozy calls a "re-foundation of capitalism."
After the Asia-Europe summit in Beijing, columnist Philip Bowring pointed out in the International Herald Tribune that the original Bretton Woods "was designed not in a panic but very deliberately at a time when America's relative economic power was at a peak."
Sarkozy's strength as a crisis leader quickly became a weakness last week. He called for an "economic governance" mechanism for Europe that would coordinate policy for states using the euro, with France at the helm, and for a European sovereign wealth fund. But Berlin said it was not properly consulted. Germans are wary of long-held French ideas for a less market-oriented and more protectionist approach. "The German government thinks that beyond home security and public order, further measures of industry protection are not necessary in Germany," a spokesman for German chancellor Angela Merkel stated.
In Paris, there's a feeling that the magnitude of the issues during France's tenure as EU head – from Georgia to the credit crisis – needs a steady hand, like Sarkozy's. Officials hinted it would be "natural" to have a stronger presidency (France) for the Eurogroup, which coordinates eurozone policy. A spokesman for Chancellor Merkel tartly replied that the "natural" president of the Eurogroup is its current president, Jean-Claude Juncker, from Luxembourg.
A French deputy minister for European affairs, Jean-Pierre Jouyet, states that "What is important is that the impetus, the energy of the French EU presidency, remains."
Officials from the Czech Republic, set to take over the EU presidency in January, and from Sweden, set to take over next July, along with the German press – have blasted what is seen as French gall. The Munich daily Suddeutsche Zeitung intoned this week that "There isn't a day without Sarkozy finding a microphone to issue a new idea through which he intends to save the world, Europe, or France."