The extraordinary Eurogroup meeting, held at head of state and government level in Paris on Sunday 12 October to tackle the vertical slide of European stock exchanges, should become the norm, according to Sarkozy. Indeed, he made clear that finance ministers, who are currently in charge of the Eurogroup's monthly reunions, cannot do enough to cope with the most delicate issues and to send the right messages. "The euro zone cannot continue without a well-defined economic government," he told MEPs during a plenary session in Strasbourg.
A supposedly stronger Eurogroup would represent the EU institutions' new firm approach to pushing for reform of the world economy and to introducing a new 'Bretton Woods', as called for by several European leaders in recent weeks. The enlarged G8 summit, demanded by Sarkozy for November and backed by outgoing US president George Bush, is seen as the forum to launch the review process (EurActiv 20/10/08).
Sarkozy underlined that the best composition of the forum should be the G8 nations plus the G5, by which the global superpowers (USA, Germany, France, Japan, the UK, Italy, Canada and Russia) would be joined by China, India, and most likely Brazil, South Africa and Mexico. Spain would remain excluded from the new round of meetings, aimed at shaping new rules for the world economy. Grumbling from Madrid was already evident at the European Council in Brussels last week.
An end to the American rule?
Whatever composition the summit has, it is clear that Europe is questioning the current financial system, which is based on American rule. Its failures have been labelled by Sarkozy a "betrayal of capitalism". "We cannot continue accepting the increasing deficit of the world power. Americans for three decades have been living over their limits," the French president stated.
As he has announced on various occasions, the reform requested by the French leader implies more rules: "No financial institution should escape regulation," he said, clearly referring to private equity and hedge funds; the powers of the three global credit rating agencies (Standard & Poor's, Moody's and Fitch) should be reduced after their "scandalous" moves during the crisis; European banks supported by public authorities should be prevented from relying on "fiscal paradises". European Commission President José Manuel Barroso added that Brussels was "looking at regulating derivatives". Managers' pay and accounting rules were also addressed.
Fending off foreign takeovers
In his fiery speech to the Parliament, Sarkozy did not let off the hook sovereign wealth funds, which are special state-owned investment funds, mainly held by oil-exporting countries such as Russia, Dubai and Qatar. They have caused disquiet among many governments, which fear political influence by other states on "strategic" sectors, such as energy and defence.
Sarkozy argued that European states should raise the level of protection of national companies against sovereign fund "predators", notably by developing their own funds. These could then cooperate between themselves to prevent European banks and companies from falling into foreign hands, especially in the context of the current financial meltdown, which has brought down most company shares to an all-time low. An Italian suggestion to make the European Investment Bank into a European sovereign fund seems to echo Sarkozy's line (EurActiv 15/09/08).
An end to tax havens?
Together with Germany and the UK, France is also calling for a tougher line on tax havens, with Sarkozy insisting in his speech to MEPs that "firstly, no bank that works with government money should be allowed to work with tax havens" such as the Cayman Islands, Monaco or Liechtenstein.
At a separate meeting of the Organisation for Economic Cooperation and Development (OECD) in Paris, French Budget Minister Eric Woerth explained: "We can no longer accept that, at a time when we are massively committing taxpayers' money to bailout plans for the financial system, this very system continues to offer tax havens."
Switzerland attracted particularly strong criticism, notably from German Finance Minister Peer Steinbrück, who insisted that Swiss financial conditions "invite the German taxpayer to evade taxes" and that the country therefore belonged on the OECD's international blacklist of tax havens.
But it remains unclear whether any concrete action could ever be agreed upon at EU level alone, as the bloc itself hosts a large number of such havens.
