EU prepares for ‘ideological’ Ecofin meeting

In a rare initiative aimed at defending his economic programme, French President Nicolas Sarkozy will participate in an Economics and Finance (Ecofin) Council today (9 July) in Brussels, feeding speculation that ministers will engage in heated ideological debates on models of economic governance.

Since beginning his term of office, Nicolas Sarkozy has raised eyebrows in Brussels for his support of “economic patriotism”, based on a more interventionist role for the state in managing the economy and stimulating job growth. 

Current EU spending rules limit member-state budget deficits (see our LinksDossier). Before his election, Sarkozy promised to increase public spending as part of a “electric-shock” approach (EURACTIV 24/05/07) to boost France’s economy by 1% and to kick-start France’s global competitiveness, a move that would clearly push the country’s spending limits for at least two more years beyond a 2010 deadline for balancing public ledgers previously agreed by EU finance ministers (EURACTIV 03/07/07). 

Sarkozy’s approach is in stark contrast to the more liberal model widely supported by the Commission and by a number of member states, notably the UK.  

In an interview with the Financial Times, new UK Chancellor of the Exchequer Alistair Darling referred to economic patriotism as “nonsense”, arguing that it is “protectionism and there is no other name for it”.

The French president also supports calls on the European Central Bank (ECB) to lower exchange rates in order to boost French and European exports, and to use monetary policy in the eurozone as a way to create jobs and boost economies (EURACTIV 23/02/07). 

Lorenzo Bini Smaghi, ECB executive board member, defended the bank’s exchange-rate policy and questioned the likely effectiveness of Sarkozy’s proposed interventionism, arguing that “it is unlikely to have a lasting effect in the foreign- exchange markets unless it is expected to be followed by domestic policy action, especially concerning interest rates”. 

Sarkozy also made clear his scepticism of competitiveness during the recent European summit, when he succeeded in co-operating with German Chancellor Angel Merkel in removing a competition-related clause from the draft text of the new EU Reform Treaty (EURACTIV 25/06/07).

Darling suggests that France’s position reflects an “ideological battle in Europe at the moment between those who genuinely believe in the Lisbon process we signed up seven years ago and those who don’t”.

French Finance Minister Christine Lagarde refuted the notion of an ideological battle. “What we are trying to do,” Lagarde said, “is to create a pragmatic capitalism that can regulate the ‘excesses’ of the market.” 

Lagarde and Sarkozy will both attend today’s meeting.

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