Sarkozy calms the crisis

France and much of Europe is saluting Nicolas Sarkozy today. Gordon Brown, the unloved British Prime Minister, is also winning praise.

Even François Hollande, the Socialist opposition leader, paid the French hyper-president compliments today on the energy with which he orchestrated last night's co-ordinated bail-out by the 15 states of the euro currency zone.

We hung around until after nine pm at the Elysée palace as Sarko, Angela Merkel of Germany and the rest of the euroland bosses settled the details of their package. So far, the decision to inject billions into their banks and guarantee their lending, has had the desired effect. The stock markets have bounced back from their Friday slump. This afternoon, Sarkozy, Merkel and the others are to announce at the same moment the numbers of euros that they will pump into the system.

It's of course too early to declare success, but we can note a few things about a novel situation. First, it would be uncharitable not to give Sarkozy credit for the way that he has banged heads together -- albeit a week after his first attempt -- as the current chairman of the European Union. Sarkozy is often criticised for making splashy announcements and failing to follow through, but this time, he seems to have managed. This was an example of le volontarisme -- getting hard things done by sheer force of will, a skill in which Sarko prides himself. 

At the cost of bad feeling between them, Sarkozy brought Merkel into a joint operation which she had refused only a week earlier on the grounds that each EU state should clean up its own mess. The Chancellor had been extremely reluctant to offer a blanket guarantee to all banks. For their part, the Germans did their own bit of arm-twisting, persuading the reluctant French to go along with the British idea of guaranteeing loans between banks. 

Another novelty was the reversal of roles. We are in strange times when a British Prime Minister comes to Paris to counsel the single currency bloc on the merits of nationalising banks and intervening in the markets. Brown's UK rescue plan served as the model for the euro-zone action.  The former British finance minister, politically discredited at home, has emerged in European eyes as something of an inspiration in troubled times.

Paris and its supporters are noting another silver lining from the black cloud that has descended on global markets. This is the ability of the European nations to act in political concert in the interests of the single currency. The French right and the left have long complained that the euro, launched in 1999 under the control of a federal central bank, needed to have political steering. Germany was opposed. Thanks to the crisis, the eurozone states have joined in their first act of "political government" -- at least according to optimistic French politicians today. The argument may not comfort Germans who are worried by the way that Sarkozy has flouted the debt rules that underpin the currency.

The European leaders feel a certain pride in operating independently of the United States, which has been the moving force in just about all crisis management of the global economy since 1945. It has not gone un-noticed that, in Washington, the International Monetary Fund is asserting itself with a voice of its own, in the shape of its boss, Dominique Strauss-Kahn, the French Socialist whose appointment Sarkozy secured last year.       

While the dust may not even have begun to settle, it's worth noting that Sarkozy's domestic approval rating is holding up. A Viavoice survey in today's Libération reports that 53 percent of those polled approve of the way that he is handling the crisis, compared with 32 percent against. Only 40 percent approve of his presidency though. Of comfort to Sarko, the poll found that only 21 percent believe that the Socialists would do better than Sarko if they were in power.

 

Comments

[dot king]

Slightly off-topic, but not that far - I was looking for an article about Carla and Valeria Tedesci-Bruni's intervention, taking the news that the Red Brigade repented terrorist Marina Petrella is not to be extradited to Italy, to her hospital bedside, where she's been on hunger-strike since Italy applied to have her back.
It's difficult not to think that the Bruni sisters have influence in high places, and it's difficult to think that Sarkozy is keeping this extreme left-wing terrorist and accomplice to murder(s) in France for reasons of "humanity" and because she's "expressed regrets".

Anyway, I couldn't find anything on that, but came across this which is of more than passing interest:

http://www.timesonline.co.uk/tol/news/world/europe/article4926325.ece

And here's an article (in French) on the Bruni intervention.

http://tempsreel.nouvelobs.com/depeches/topnews_reuters/20081013.REU2982/la_soeur_de_carla_bruni_a_sensibilise_sarkozy_au_cas_pe.html

[Lex]

Bravo! Well done. I hope that this gives the EU & the UK the confidence to more actively engage Washington. A unified Europe acting in concert does have the strength to influence -- and oppose, if need be -- the US.

[John O'Donnell]

I have been a unrelenting Sarkobasher until recently but I must admit that he has shown outstanding leadership during the French presidence of Europe. His handling of the Russia/Georgia flare-up followed by his current marshalling of the European response to the financial crisis shows that he has quite another and admirable dimension when he's acting on a wider stage.
Against all my fears and expectations, the Sarkozy-led EU presidence has been an outstanding success.
After six months leading the powerful, it's going to be hard to focus on local French issues affecting the powerless.

[Roger Goodacre]

Forgive my scepticism. Sarkozy and Brown are two politicians in big trouble in the polls. (In Brown's case, he has the lowest poll ratings of any UK prime minister since the war - quite an achievement - and he's heading for ignominious defeat at the next general election).

Pinning all the blame on 'Anglo-Saxon liberalism' in one case, and greedy bankers on the other is a cheap but popular shot. This crisis is a political godsend to both of them - and doesn't it show.

As UK chancellor, Brown was ultimately responsible for 10 years for regulating the UK's financial services, and he went to sleep on the job. He was happy to collect the kudos and the huge tax dividends while the economic boom lasted, and now that it's all gone sour he, of course, tries to pin all the blame on the bankers. In the meantime, during a prolonged period of growth, he failed to make any provision for bad times, fuelled the supply of cheap money, sold off the UK gold reserves when prices were at rock bottom, and has run up the most enormous public deficit (disingenuously hidden away in the public accounts), which future generations will have to pay off.

Yes something needs to be done to restart confidence in the banking system. But the idea that the same politicians who colluded in the present crisis are the ones who are going to find the right answers is not very convincing. Brown may appeal to Europeans because he's a dirigiste at heart, but his view of himself as an economic guru is not shared by many who've suffered the effects.

[Mauvezin]

The Gordon Brown's pragmatism must be hightly heralded.

>>Dot
Les soeurs Bruni sont de ridicules bobos et N Sarkozy fait preuve d'une tres coupable faiblesse et, pire, insulte la Justice italienne, Justice démocratique ou la peine de mort n'existe pas.

[dot king]

"Les soeurs Bruni sont de ridicules bobos et N Sarkozy fait preuve d'une tres coupable faiblesse et, pire, insulte la Justice italienne, Justice démocratique ou la peine de mort n'existe pas."

Mauvezin, mes pensées exactement. Il demande la coopération de l'Italie dans cette crise et en même temps il leur fait un pied de nez.

[Francois D]

In these circumstances, regardless of whether the UK is or not in the eurozone, important is solidarity in times of crisis. Only that may comfort sterling and euro.

But this is a first step, pending a future Bretton Woods, as asks Brown.

That was a great day for him: he acquired statesmen's status entering in history. But is he now Europhile? This afternoon, Perfidious LeMonde recalls that he convinced Tony Blair not to join Euro. Does he changed his mind after coming in giving advice to Eurocountries?

And d'not forget that this crisis was born from a social crisis in US.

By the way, it seems that a recent poll indicates that 93% of French people would vote Obama.

[vince richardson]

Contrary to this article the EU has been culpable in causing the crisis.The Basel Banking agreements imposed by the EU on the banking industry resulted in the "mark to market" assessment model being applied to assess banks creditworthiness.

This has proved disastrous in a declining economic market as banks were down rated and ultimately made unstable because perfectly good assets are having to be written off at very low or non existant levels(to meet the Basel requirements).This has led to billions being wiped of balance sheets at the stroke of a pen and greatly excerbated the banking crisis. The claim that the EU is now riding to the rescue is laughable as EU regulation inadequacies caused the collapse in the first place.
In addition, the EU`s first reaction was to allow each country to act UNILATERALLY as each nation saw fit( and this after Ireland and Greece had already broken away and acted against EU law)...some show of unity....
Now the EU members are taking the lead from London to bail out the banks...So where is the Brussels/ECB lead in all this?They are no better than a bunch of headless chickens....and still no sign of the Basel agreements being dropped any time soon.
Excuse me if I dont join in the congratulations of the EU yet

[Yogi]

Well Charles, I'm sure some readers here would complain, but some other would be delighted that you comment a bit about the contents of the diaries of the former head of police intelligence ! Did you ever lay your hands on them ?

[Thanks Yogi. I wrote about this last week when it came out -- in a news story for the newspaper http://www.timesonline.co.uk/tol/news/world/europe/article4916521.ece I'll try to post a more reflective item here. Sarko's alleged affair was just the news hook to the story. CB]

[Blendi Progri]

Great effort from both Sarko & Brown (and others too) but I want to say only this:

Is the first time that I hear something good about Gordon Brown, mostly in a UK it has become a fav. past-time to put him down and say...(well nothing has been left unsaid about him..and more) and it is to Charles's credit that he praises Brown.

Well done Charles, this not just sets you apart from -most of the journalistic crowd that go by the instict of the pack- but says a lot for your realistic and impartial reporting.

That is all I had to say on this.

Thanks Charles.

There's hardly a week that goes by that a well respected journo ( that I like and read every Saturday- that) where he bashes Gordon from every angle. Not counting all the others.

Somedays it feels too much. it was the same previously, from this very same paper (another guy S.J.) in every article bashing Tony Blair.

One fels that this is a kind of relentless hyper- hysteria...even if all true..it is UNFAIR, I had/have kind of revolt and want to post in their articles:

Hey guys- please chose another subject,Just once/Take a Break/ leave Gordon Alone... one can't draw his salary on one subject alone...but what is the point I said to myself..and only now I think that MEDIA, however few good things (this is the 1-st as far as I am aware)has said about Him/gordon, when it wants to and in right circumstaces it can be fair.

About Gordon or everyone, all is needed is some realism. Give him some recognition- and Charles did just that.

Great journalism is simple and impartial and brave too.

hi 5 ^ @ CB.
:: )

[Sinisa]

So what? What steps did these zeroes take to ward off the crisis? Answer: None. Now we are expected to applaud their farsightedness. You might as well give a prize for recognition that the sun rises in the East.

Besides, it was probably at Carla's insistence.

[ken]

No respite from Sarko fixation, but at least this time it's about something of actual significance. As for success, don't watch the stock market--watch the credit spreads, especially LIBOR.

[Lex]

Dot,

Thanks for the link. As an American, I am of course shocked. Shocked! Cabinet minister's wives, little boys, cocaine. Oh dear. Well, in that context, it is no wonder that they French sniggered when we were so upset with Mr. Clinton's indiscretions in that fellatio business, not to mention the unpleasantness with the cigar.

It is curious that the chap jotted down his housekeeping notes in the journals. Was he just a stream of consciousness kind of fellow, or did he spend his evenings pouring over his notes from the day. "Oh yes, jolly good, the cat litter!" or "Bollocks! I forgot to buy milk."

As for Les Souers Brunis, it is curious that they would become interested in Marina Petrella. I find it more curious that the Italians are so keen in having a dotty old terrorist returned, when they can barely keep their country from falling apart. Of course, not being in the government, Ms. Petrella would not be exempt from prosecution, and what better succor for a fascist than a criminal to throw to the lions. Maybe the tears of one's enemies sooth the injection points of the botox.

[azloon]

[this crisis was born from a social crisis in US.] Francois

it may become a social crisis, but it's origin is rather mundane. like an influenza which incubates in the chicken coops of asia, so financial disease migrates across borders because nationals of all stripes have partaken of the apple of 'fast money.' always was, ever will be.

for a primer on financial bubbles going back centuries, you might want to look at 'extrordinary popular delusions and the madness of crowds,' by scotsman charles mckay, written in the 1840s.

france's own gustav le bon, in the late 19th century, also wrote about this sort of crowd behavior.

la plus ca change...

[justfrench]

Ask you the qestion why biggest uk banks all collapsed?

And not the french ones.Even if some of them received serious chocks like Société Générale.

The answer is irresponsability and Greed. French are not immune at all but it is less in our culture. And i think our instinct warned us against this culture of excess(Which this time is typically anglo saxon)

The time of Austerity has come. It is what happen when one is unable to use his liberty normally.

try to follow this saying.it functions very well : "Don't spend the money you don't have"

Simple no ? ;)

[Francois D]

Azloon

I am not an economist but I recalled social origin of this crisis without being able to determine if it is the spark or the fuel.
What is interesting in the economy is its resemblance with live: a balance of circulatory and psychology with a struggle for survival.

If there was a thank to give to Sarko it is to have invited Brown to the eurozone sunday meeting (as it was a mistake to have forgotten Spanish on previous Sunday).
That's what this meeting is historic because it helped to resolve a crisis situation, the first since the euro. It also addresses the place of sterling in Europe.
Europe may be very strong if political decisions are realized between 5 or 7. It may be very low with 25 or 27.
Now, it is necessary to consider what the rest of the world will think.
P Krugman, the latest Nobel, has publicly praised Browm's role.
And why not a Nobel prize, next year? This would be earned, if it succeeds ..
"Politicians become great when they are there at the right time". (I d'not remember if this sentence or likeness was pronounced by Churchill or De Gaulle).

[Judith]

Gordon Brown was praised by Paul Krugman in NYT today. (Azloon I note another American economist Nobel prize winner).

And it seems Gordon Brown's role both in dealing with Britain's problems and leading the way for Europe and, perhaps even the US, has been very positive. There are times when a dour, dark Scotsman can project a very comforting presence.

I just love it when a crisis can be dealt with through talk and metaphorical banging together of heads. It is very impressive that the eurozone came to a coordinated position in the absence of institutional frameworks. This I think indicates the extreme severity of the situation as well Nicolas Sarkozy's skill at negotiation. I can imagine that he would talk everyone into submission. They would agree out of sheer nervous exhaustion.

And still the US disappoints. The end of a presidency is obviously a time of great risk. However it is not hard to imagine earlier Presidents who would have been using all their political skills and any remaining political capital to drive through a concerted program right up to the very last day of their time in office.

[rocket]

Justfrench

"try to follow this saying.it functions very well : "Don't spend the money you don't have"

Easier said than done especially in a country such as the US where people are maxed out on their credit cards and where previously obtaining credit was like obtaining air to breath. Money lenders everywhere enticing you. Some people as in any country simple can't control their own budget. As for housing "La pierre" as you say in French is seen as a financial instrument in the US to be bought, renovated and flipped for a profit as quickly as possible. It couldn't last and add to that the US policy of granting loans to those who could not afford them in order to increase minority ownership of homes. In Europe "la pierre" is a more stable and long term instrument of investment (except Spain)

Kudos to Europe and ("mais oui" the infatigable Sarkozy) for getting it together and making an attempt to offer an alternative solution to this crisis so that one country's economic woes can't bring down the whole world economy.

[christopher muir]

Is it possible that George Bush is hanging up a painting of John Maynard Keynes in the White House?

[azloon]

Judith/Francois/Justfrench --

bush, with no political capital remaining, is wisely staying out of the limelight. traders on the floor of the new york stock exchange groaned audibly when it was announced that bush would be speaking on the crisis during market hours. he is radioactive, toxic waste. his 'stock' has sunk to zero. too late to 'short' him.

if it turns out that france avoids the extreme damage of britain and the u.s., i would agree that 'cultures of excess' are an explanation.

the u.s. is preeminent in the 'excess' model. it's our nature. otoh, britain, not historically associated with financial excess, did quite a good imitation of us. london's City actually had ambitions to 'outgreed' wall street (that's a fool's errand, and quite dangerous).

the upside to all this (as Judith notes), and perhaps its abiding legacy, is the acknowledgment of our utter interdependence.

in dour, vieux europe, sarko's hyperkinetic style has found a good use. he clearly 'got' before others the need to act quickly together and was willing to bang a few heads together.

Jean Wayne to the rescue !

[dot king]

"Marina Petrella. I find it more curious that the Italians are so keen in having a dotty old terrorist returned, when they can barely keep their country from falling apart."

LEX

I think it's the pressure groups of families of victims responsible for this special interest in Petrella. I suppose if the Italian government can get people preoccupied with that then they'll be distracted from everything else that's going on - presidential hair transplants, economy falling apart, resurgence of fascism etc.

It has provided for Sarkozy an opportunity to give his new First Lady a rôle - he said yesterday that if she went to see Petrella to announce the "good news", it was because he asked her to. just like - erm what was her name déjà? Cécilia, that's the blighter - Bulgarian nurses wasn't it? Ms Petrella has been a social worker - it's close enough for a comparison. (irony)

Of course it was because of the activities of the Red Brigades that the Tedeschi-Brunis moved to France in the first place, as the RB specialised in the kidnapping of children of wealthy families and sending lopped off body parts to the families, planting bombs to go off in crowded places, generally your usual run of mindless bloodthirsty terrorists.
IMO Petrella doesn't merit any more clemency than any other mass murderer - I don't care how much she's repented, apologised, expressed regret, nor how much good she's done as a social worker since France gave her refuge.
She's lived free for 20 years after committing the worst of crimes, she should be thankful for that and accept justice when it catches up with her.
That the president's wife should be instrumental in this affair is scandalous. Carlita said she was going to involve herself in "humaitarian causes" - is this it then?
And that law - the one that permits such "anomalies" should be reviewed - c'est une honte à la France.

[Daniel Strohl]

AZLOON,

"in dour, vieux europe"

Since Europe is feminine in French, one should say "vieille Europe".

However, les Etats-(Unis) are masculine. Therefore, one should say "les vieux Etats-Unis perclus de rhumatismes" :)

[dot king]

"a dotty old terrorist" LEX

Please choose different premier adjectif - and revise notions of "old" - Marina Petrella is (only) 54! :)

[Daisy]

Sarko wanted a common fund to save the banks, but the EU countries rejected that idea and preferred to take unilateral action instead. Now this weekend, Sarko announces that the plan is for each country to save itself. Hmmm, why is this little weasel getting credit for this?

[PAUL]

Order, Mr Chairman! This thread is supposed to be about the economy and not about Italian terrorists.

[dot king]

Order, Mr Chairman!

Posted by: PAUL

Now would that be Paul 1st or Paul tout court?

Now, tell us about the economy :)

[Rick]

It will not have escaped DOT’s notice that VINCE RICHARDSON in his excellent contribution gave a telling illustration of ‘notional value’, will it...?

[dot king]

It will not have escaped DOT’s notice . . . 'notional value'

RICK

'Fraid so - just reread it and still haven't seen it, but wouldn't know one end from the other in any case :)

[Daisy]

Perhaps Carla and her sister are advising Nicky on the economy!

[peter kinsley www.peterkinsley.com]

Can anyone confirm that when Sarkozy said goodbye to George Brown yesterday they shook hands and as Brown turned away, Sarkozy put his finger tips together and and made a kind of Salaam to him?

[Mauvezin]

>> DOT
"Please choose different premier adjectif - and revise notions of "old"
*********************
;-)))))))

[christopher muir]

DANIEL -

I thought you might like to know of a joke going around these parts in relation to a particular territorial name. "USSA stands for the United Socialist States of America,"

[Don]

"The European leaders feel a certain pride in operating independently of the United States, which has been the moving force in just about all crisis management of the global economy since 1945."

Sixty-three years.
Think about that.
The next time you want to complain about the US, think "sixty-three years".
Could someone please explain why no other nation has been able to take the lead for the last sixty-three years? Also, keep in mind that this isn't limited to the economy. The US is frequently expected to lead in solving a variety of issues.
Sixty-three years.
Why is that?

Is the US perfect? Of course not, but it has been the best solution for sixty-three years.

[Lex]

Dot,

Let's see: you inherited buckets in your forties, retired to France, and you are round about sixty.

or

You retired in your fifties and are around seventy.

or

You retired in your sixties and are around eighty.

Yet, somehow, I can't imagine you as being 'old,' though you seem to be young enough still to be vain about your age. After all, weren't you just painting ceilings earlier this summer?

[azloon]

[USSA stands for the United Socialist States of America] CM

it's no joke, Christopher. it's fact.

i hope all non-u.s. posters will show a little mercy to future rouge cou and other rude american intruders to this blog as you remind them that american capitalism is dead and they can no longer lay claim to any sort of political superiority. and not only are we not superior, but we are in the process of converting wholesale to the european socialism.

we can't even figure out what to do to solve our own crisis. the europeans had to do it for us.

atheists of europe, please pray for us.

:)

p.s. Terry, are you safe? have you tried to harm yourself?

[qwerty]

Azloon this is ridiculous. It's the death of ideology, not of capitalism. Or it's the birth of the doctrine of pragmatism. And vive Sarkozy, the Prince of Pragmatism. Gordon Brown as well.

Once this is all over (not yet), the State will sell off its banks and other assets with a tidy profit that will benefit the taxpayers.

And hopefully the market players will have learned their lesson -- till next time.

[qwerty]

I'll revise that opinion I just issued. It won't be back to business when it's over. The system will change, at least in Europe.

1) Sarkozy has made it his personal mission (and I applaud) to curtail the excesses of financial capitalism and go after all the bastards who let it happen. We know the economy needs the financial market, derivatives (they're just insurance contracts, n'est-ce-pas) and even structured products. But the "real economy" comes first.

2) A New Europe was born this weekend. Forget the referendum, forget Irish selfishness (I already raised that when they voted no to the Lisbon constitution, it's confirmed by their go-it-alone attitude last week with respect to guarantee of deposits), forget Lisbon, forget the institutions. When they need to, European leaders can get together and make things move.

[christopher muir]

AZLOON -

Your objective comments in response to the USSA joke were appreciated. I'd add that I do take the recent market events very seriously. How many more countries will have families living in cars is yet to be known. None, I hope.

[dot king]

"Let's see: you inherited buckets in your forties, retired to France, and you are round about sixty."

LEX

This is the closest except for the "inherited buckets" bit :)

I moved to France 17 years ago, but knew it would only work if I did - work that is.

Fortunately I'm not of a materialist or acquisitive disposition and have never felt the need to live outside my means. No fat inheritances have ever come my way - and never will - though I wouldn't have minded too much if they had . . .

I've just stopped working (teaching) because the (private) school, with falling rolls, no longer has the budget to pay a salary to someone to teach half a dozen Anglophone pupils, so I've become a "savage cutback" - ouch!
I would have done one more year then stopped anyway, so it's just brought things forward a little.

Right now I'm really missing getting up at 6.45am to be yawned at - but getting used to it - hard though it is! :)

Yes, you are an attentive reader, I was painting a ceiling - it still needs another coat - I lost patience a bit when two weren't sufficient and it still looks patchy, but I can feel the need to finish it off coming on any time now . . .

BTW I'm 61 going on 35 or so
;D

[dot king]

"you seem to be young enough still to be vain about your age."

LEX

Can you revise the adjective "vain" please? "Old" is inevitable (sooner or later), "vain" doesn't apply though - I hope that's not how I come across - even about my age :)

[Valentin]

"Contrary to this article the EU has been culpable in causing the crisis.The Basel Banking agreements imposed by the EU on the banking industry resulted in the "mark to market" assessment model being applied to assess banks creditworthiness."
(Vince Richardson)

1- Basel agreements deal with risk management, and have absolutely nothing to do with mark-to-market accounting rules.

2 - Basel agreements are being implemented internationally, US banks included, and are in no way an European invention, or imposed by the European Union.

3 - Mark-to-market accounting rules have been, them, *imposed* by the SEC, the US Securities and Exchange Commission and FASB - Federal accounting standards board, probably because of the Enron / Arthur Andersen accounting scandals. Mark-to-market (which is, like the derivatives, yet another bright american invention) has been put into practice, as usual, without the necessary assessement of its effects, and makes little sense for OTC transactions (private, or which don't pass by the regulated exchanges), or when there is no market to begin with.

http://money.cnn.com/2008/10/01/news/economy/mark_to_market/?postversion=2008100120

[azloon]

QWERTY

i beg to disagree.

american-style, wild-west capitalism is DEAD.

and that is our style of capitalism, so it's dead.

no mas.

i know. i was deeply involved in it for many years.

will what comes next be better? perhaps.

let's hope so.

[Daniel Strohl]

CHRISTOPHER,

"USSA stands for the United Socialist States of America,"

as URSS stood for Union des Républiques Socialistes Soviétiques - CCCR in Russian :)

PS : when things go badly, a smile may help. But in the present case, it is of course not meant as irony or mockery.