The Sarko smackdown!

 

Paul Mason clashes with President Sarkozy over French and German involvement in other countries' politics

I've just had, as far as my French can comprehend, a verbal run-in with the President of the République Française. Nicolas Sarkozy came on stage with a face like thunder for reasons I will explain below. He took two questions from the French and Chinese press, and then me.

I asked: "It's evident that you and Mme Merkel, the two most powerful governments in Europe, are trying to change the governments of Italy and Greece. How is that just? And once it's started, where does it stop?"

His answer was that I was wrong, that I had made my mind up in advance, that I did not understand the subtleties of the European construction because I am from an island.

He then denied that there was any attempt to remove the governments of Greece and Italy, and said that was not what democracy was about.

Within the hour it was announced that Italy, having refused money from the International Monetary Fund, had accepted IMF "surveillance" of its public finances. During the week German Chancellor Angela Merkel is said to have phoned the Italian president to explore the possibility of a change of government. EU officials have certainly been in contact with the Greek opposition to explore the creation of a national unity government. We will find out about that today.

I will be surprised if either government survives, and of course external pressure is only one factor here: both are crumbling internally under pressure of implementing austerity on their own electoral bases.

Afterwards, we found out the reason for Mr Sarkozy's annoyance, and also that of David Cameron, who looked similarly racked-off. It turns out that Germany has, yet again, nixed a vital part of the international plan to save the eurozone.

The Brit special advisers were briefing that the IMF might issue Special Drawing Rights - this is like printing money. It's a politics-free alternative to actually borrowing the money and having to get the decision through parliaments. Mrs Merkel vetoed the idea and then left the summit early. It's been briefed that she's run into opposition from the Bundesbank - either to the IMF plan or to specific proposals to expand the EFSF.

SDRs were issued for the first time in decades at the April G20 in London - to the tune of $250bn.

We are still waiting for the final communiqué but where all this leaves the effort to save the eurozone is this:

- The deal agreed in Brussels is back on track, in the sense that it remains as fuzzy, unfunded and incoherent as it was on 28 October, but has not been formally nixed by Greece. It apparently took the combined might of Barack Obama and Hu Jin-tao pressuring Europe to get this done, and the combined might of Sarkozy and Merkel on Greek PM George Papandreou, finished off by the combined might of every internationally clued-in MP in Pasok.

- But the EFSF remains at the design stage - Merkel's storm-out came after she had briefed journalists that no G20 outside Europe would commit to lending to the EFSF. This is a dig at China, and China is not buying because it realises that through the EFSF it could lose its money - whereas through the IMF it cannot.

- So the IMF is under pressure to be part of the euro solution - I understand from the Brits this will be formally acknowledged in the communiqué. But even here, you run into democratic accountability. The US has not even got Congressional approval for the last tranche of IMF money it committed to - and David Cameron is pretty clear he cannot win another vote to expand Britain's IMF commitment (about £30bn currently of which £5bn drawn down).

- So it's all down to the ECB. The Germans - indeed northern Europe - have created a trap for themselves in which it is either fiscal union or a rough-hewn fiscal union in which the ECB does the heavy lifting, in defiance of its mandate and culture, and the instincts of the national central banks.

It is, as I said on Newsnight last night, like pass the parcel with a stick of financial Semtex: Greece as the detonator, Italy as the explosive mass.

I am glad the president felt able to engage me in frank exchange: when I shouted to Signor Berlusconi last week "how can the world take you seriously if you can't implement austerity?" a number of svelte Italian TV presenters nearly had an attack of the vapours.

Europe's problems nearly always start with miscommunication: the Ems telegram and the Zidane headbutt being just two examples. It's better to vent frustration and to address the unasked questions.

Rest assured I have a whole bunch of other impertinent questions to ask the heads of state of China, Russia etc should they care to come on Newsnight.

 
Paul Mason Article written by Paul Mason Paul Mason Former economics editor, Newsnight

End of an era

After 12 years on Newsnight, Economics editor Paul Mason has moved on to pastures new and this blog is now closed.

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  • rate this
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    Comment number 41.

    37.stanilic


    You are quite right. This is the reason that Europe will disappear as a major economic player as time goes on. The EU and the Euro were attempts to stop that and some are still fighting for them for that reason. Doesn't look good at this point.

  • rate this
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    Comment number 40.

    A different government in Italy would not make any difference. There is no support in the country for the market-oriented reforms expected by the EU - neither on the right nor on the left. Also, "austerity" and higher taxes cannot do the trick this time: the problem is the country's FUTURE fiscal position, which depends on growth. With or without Mr B, the country is doomed.

  • rate this
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    Comment number 39.

    US has not even got Congressional approval for last tranche of IMF money. So it's all down to the ECB. The Germans - indeed northern Europe - have created a trap for themselves, one from which they can easily extirpate themselves via Audit Commissions. If they won't do the right thing, the public deserves to know what is the problem. EU's problems started with duplicity, unasked questions.

  • rate this
    0

    Comment number 38.

    Merkel's storm-out came after she had told journalists no G20 outside EU would commit to lending to EFSF. This may be a dig at China, but not necessarily; it depends how it goes down, through what instruments. So the IMF is under pressure to be part of EU solution - Who wants IMF with its severe lending practices?

  • rate this
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    Comment number 37.

    12 ComradeOgilvy

    De Gaulle never knew the meaning of the word gratitude.

    It is the way the nations of Europe in the past and the future are so interconnected which is being casually forgotten at the moment. The European leaders are all nationalists at heart; thus the Euro has no lender of last resort. We will all hang seperately content in our national rectitude.

 

Comments 5 of 41

 

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