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Sarkozy criticism overshadows EU finance meeting

Interview

European Union financial leaders reacted angrily at a meeting in Portugal on Saturday to comments by French President Nicolas Sarkozy published in a French newspaper.

“The news content of the French president’s criticism of the European Central Bank is zero. So is the influence such comments have on the behaviour of the ECB council,” the head of Germany’s Bundesbank, Axel Weber, said in an unusually sharp speech. In comments published in French daily newspaper Le Monde on Saturday, Sarkozy criticized the ECB’s decision not to lower interest rates on September 6 as ‘curious.’ “They made things easier for speculators and complicated things for businessmen,” Sarkozy, who won election in May on a pledge to reform the sluggish French economy, said.

French Finance Minister Christine Lagarde, who on Friday came under severe pressure from her peers not to back away from an April agreement on budget reform, backed her leader, saying that Sarkozy was right to raise the issue at a time when the euro was reaching record highs against the dollar and pound. “We have to stay attentive when it comes to exchange and interest rates,” she added. In the Le Monde article, Sarkozy also questioned the role played in the recent financial crisis by Luxembourg’s Prime Minister Jean- Claude Juncker, the president of the 13-member group of countries which use the single European currency.

“What initiative has he taken? In the question of financial capitalism, it’s (German Chancellor) Angela Merkel and I who are leading the debate. It wouldn’t be absurd for the president of the euro group to ask himself some questions,” Sarkozy commented. That criticism was flatly rejected by the leading figures at Saturday’s meeting in Porto. “Juncker deserves our recognition” for his effective and energetic leadership, EU Economic and Monetary Affairs Commissioner, Joaquin Almunia, said. “He’s been extraordinarily effective and efficient, and that’s something that has to be noted,” the president of the ECB, Jean- Claude Trichet, added.

 
The two-day meeting, which began on Friday with a meeting of eurozone finance ministers, continued with a meeting of EU finance ministers and concluded with a meeting of EU ministers and their counterparts from the southern and eastern Mediterranean, had been expected to focus on financial stability. In a day and a half of talks, delegates did indeed discuss the recent financial turmoil, paying particular attention to questions of financial transparency, good governance and the efficient and open functioning of cross-border financial institutions. The discussions on cross-border arrangements were particularly “important and interesting”, Almunia said. Ministers also raised the question of the future management of the IMF and World Bank, reinforcing the idea that the leadership of the two organisations should no longer be seen as the exclusive preserve of the EU and the US.

“We agreed that we should give greater weight to the most dynamic emerging economies” in the forum of the IMF, Portugal’s Finance Minister Fernando Teixeiro dos Santos told journalists. And in the meeting of the so-called Euromed group, Almunia called for more EU investment in the countries of the southern Mediterranean as ministers agreed to set up a network of public-finance experts to share their experience of reform. “Investments to the southern Mediterranean countries surged last year to €18 billion ($25 billion), more than double the total in 2004. But this is not enough, considering that so far less than 2% of the EU’s foreign direct investment goes to this region,” he said.

The talks were welcomed by Mediterranean countries, with a representative of the Egyptian Finance Ministry saying that they had been “very successful and very fruitful” and “added a new dimension to attempts to promote a strong financial sector.” But time and again, the growing tension between France and the EU over matters of budget planning came to the fore, overshadowing the meeting’s main agenda.

On Friday, euro group members criticized France’s apparent retreat from an April pledge to produce a balanced budget by 2010, with Juncker saying that “the degree of ambition demonstrated by France is not entirely in line with our level of expectations.” A visibly tense Lagarde responded that “we will do all we can to reach our objectives as soon as economic conditions permit, but if conditions for economic growth change significantly, it will be much more difficult.” Lagarde was again on the defensive on Saturday, as journalists repeatedly brought up the question of Sarkozy’s comments. “We should not recoil from debate, there should be no taboos,” The French finance minister said. (m&c.com)

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