Britain questions Sarkozy’s proposal for sovereign funds
British Business Secretary is not quite sure if the sovereign wealth funds in Europe will help boost the economy.
5 November 2008
DUBAI - British Business Secretary Lord Peter Mandelson raised questions on Tuesday about French President Nicolas Sarkozy's proposal to create sovereign wealth funds in Europe to support industry during the financial crisis.
"I'm not quite sure what the purpose of those (SWFs) is. If it's to lead investments by Europe abroad, then I can see the case. I'm not sure I would regard it as overwhelming," Mandelson told reporters in Dubai at the end of a Gulf tour with British Prime Minister Gordon Brown.
"If, on the other hand, the point of such a wealth fund is to defend European companies and frustrate investment by others in those, I'm not sure that there is a need for that," said Mandelson, a former EU commissioner.
"But it's really up to President Sarkozy to define what he means by that," he added.
Sarkozy, whose country holds the European Union's rotating presidency, told members of the European Parliament in October: "I'm asking that we think about the possibility of creating, each one of us, sovereign funds and that perhaps they could be coordinated to provide an industrial response to the crisis."
Sovereign wealth funds are investment vehicles typically controlled by hydrocarbon-rich countries like Russia or Gulf nations with trillions of dollars at their disposal ready to invest abroad.
The funds, which are generally defined as state-controlled investment vehicles, have been around since the early 1950s but their ranks have swollen in recent years.
However, their rise has been accompanied by fears in some European countries and Washington that the governments controlling sovereign wealth funds could use them to advance their own political and strategic aims.
"I am well aware of disagreements among certain countries" on this subject, Sarkozy said, "but I cannot imagine being told that a united European response was needed for the financial crisis, but not for the economic crisis."
[AFP / Expatica]