Sarkozy lashes out at bonuses but shows support for Brown

Click to follow
The Independent Online

In a dramatic set-piece address to the World Economic Forum, Nicolas Sarkozy called for radical financial and economic reform. He described the remuneration enjoyed by some bankers as "morally indefensible" and "will no longer be tolerated because they bear no relationship to merit".

The French President said he backed Gordon Brown's proposed "Tobin tax" on financial transactions and offered stout support for Barack Obama's plans to break up banks that are "too big to fail". And, though he avoided mentioning China by name, he called on those trading nations who persistently run huge surpluses by allegedly manipulating their currency to desist.

With some evident frustration, he appealed to his fellow G20 heads of government to implement the financial reforms already agreed at summits in Washington, Pittsburgh and London; the failure to do so amounted, he claimed, to international "schizophrenia".

In a slightly throwaway aside for such a momentous issue, Mr Sarkozy added that "we cannot have, on the one hand, a multi-polar world, and, on the other, a single benchmark currency across the globe". His remarks echoed The Independent's report last year on moves in the Middle East and Russia to oust the dollar as the world's reserve currency. He did not develop the theme further.

In a spirited performance, Mr Sarkozy made it clear that, whatever the moral failures of bankers and others, he believed that the great global imbalances that grew up during the boom were the "root of the problem".

"It was the imbalances in the world economy which fed the growth of global finance... Countries with trade surpluses must consume more and improve their living standards and social protection of their citizens," he said.

He went on: "Exchange rate instability and the undervaluation of certain currencies militate against fair trade and honest competition". The "monetary dumping" he referred to seems to have been a reference to the Chinese renminbi.

However, Mr Sarkozy's most withering scorn was reserved for the financial community, and he urged more restraints on the bank's ability to borrow, speculate and pay large bonuses: "President Obama is right when he says that banks must be dissuaded from engaging in proprietary speculation or financing speculative funds... This debate must be settled within the G20."

The UK and France are the only major economies to have imposed a levy on bank bonuses so far. Mr Sarkozy urged more to follow: "There are indecent behaviours that will no longer be tolerated... There are excessive profits that will no longer be accepted because they are without common measure to the capacity to create wealth and jobs.

"There are remuneration packages that will no longer be tolerated because they bear no relationship to merit. That those who create jobs and wealth may earn a lot of money is not shocking. But that those who contribute to destroying jobs and wealth also earn a lot of money is morally indefensible."

On the so-called "Tobin Tax" on financial transactions, Mr Sarkozy said: "I support without reservation the commitment of Gordon Brown, who was one of the first to defend the idea." He also called for international environmental, labour and health laws to be put on the same footing as trade law. That is, with an organisation analogous to the WTO able to enforce those rules through fines and sanctions.

Although Mr Sarkozy was elected President in 2005 on a free market platform, he has reverted to a more traditional French opposition to the "Anglo-Saxon model". Yesterday he said that he was gratified that the "differences between the Anglo-Saxons and the Europeans" were beginning to blur.

The next G20 summit will be hosted by Canada, in June.