Friday, 26 September 2008

Global Economic Crisis: France to the Rescue?

Over the past week I have been wondering if the current global economic meltdown, caused in part by the lack of US regulation over the financial services industry over the past decade, would have an impact on the way Europe's political winds are currently blowing. Judging from French president Nicolas Sarkozy's speech in Toulon yesterday, it would appear that for its part at least, the French right does not intend to scale back its ambitious plans for liberalizing reforms in France. But at the same time, Sarkozy intends to use the example of the crisis to sell to the Anglo-Saxon world a more Gallic system of economic regulation. The jist of his speech, it would seem, is that he wants to bring France's economy more toward liberalization and to bring the UK/North American economy more toward regulation, and perhaps the two can meet in the middle.

The past few years in Europe have seen a fundamental shift toward the right, as Europeans grow anxious about generous social welfare programs that now seem unable to sustain themselves over the long term. First, Angela Merkel's Christian Democrat party wrested power from the socialists in Germany through a coalition goverment. Then Nicolas Sarkozy handily beat the socialist candidate Segolene Royal in the French presidential election last year. Italy's brief period with a leftist prime minister came to an abrupt end earlier this year with the return of Silvio Berlusconi. And in the UK, Conservative leader David Cameron seems likely to lead the Tories to a victory over Labour whenever the next election is called. The only big outlyer is Spain, where socialist prime minister Jose Luis Rodriguez Zapatero ousted the conservative government a few years ago and is still standing strong.

Both Merkel and Sarkozy have made reforming the country's social models a priority - undertaking a liberalization program for the economy. Sarkozy's has been the most aggressive. So with the near collapse of the credit market in the US exposing flaws in the free-market capitalsm that has prevailed in the Anglo-Saxon world over the past decade, I've wondered whether the ascendancy of the European right might be finished.

But Sarkozy seems to be quickly repositioning himself in the face of the crisis. The man the French left has dubbed "Sarko l'Americain" lambasted the US-inspired lack of regulation in the last few years yesterday, saying that the extreem free-market deregulation undertaken by the Bush adminsitration, "was a folly whose price is being paid today."

In his speech yesterday he warned Europe that it cannot escape shock waves from the US financial crisis and that to protect its future, it must take the initiative in rewriting worldwide banking rules to end the "folly" of an under-regulated system he said is now "finished."He said that at the EU's next meeting he would, as the current holder of the European presidency, propose swift action for the EU to tighten controls over European banks. And he said that the world's major parties should gather at a special summit before the end of the year and develop an entire new monetary and financial framework to replace the U.S.-dominated Bretton Woods system set up in 1944.

So, I wouldn't count the European center-right out yet. After all, their opposition, European socialism, is largely adrift ideologically these days. If the European center-right can position itself as the political movement that can look out for Europe's interests during this crisis and strongarm the US into increasing regulation, it could end up even stronger from this crisis than it started. I have yet to see any reassuring plan of action from Europe's socialists.

1 comment:

Jean said...

I think Sarkozy is equiped well to coordinate a strong European response to this crisis.