Sarkozy blasts globalisation, 'indecent' wages

28th January 2010, Comments 0 comments

French President backed US President Barack Obama's plan to restrict the size and operation of US banks and implicitly criticised China at the World Economic Forum on Wednesday.

Davos – French President Nicolas Sarkozy went on the warpath over globalisation and "indecent" pay for finance executives in a hard-hitting speech at the World Economic Forum on Wednesday.

Sarkozy also implicitly criticised China and backed US President Barack Obama's plans to clampdown on banks as he described how free market capitalism veered out of control and caused the financial crisis of the past two years.

"From the moment we accepted the idea that the market was always right and that no other opposing factors need be taken into account, globalisation skidded out of control," Sarkozy declared.

Without state intervention to support the financial system there would have been "total collapse," he said. "Not to draw the conclusion that we must change our ways would be, quite simply, irresponsible."

Sarkozy backed the US president's plan to restrict the size and operation of US banks.

"President Obama is right when he says that banks must be dissuaded from engaging in proprietary speculation or financing speculative funds," he said.

Taxing the "exorbitant profits of finance to combat poverty" would "contribute to putting us on the path of a moralisation of financial capitalism," Sarkozy said, also praising British Prime Minister Gordon Brown for proposing the tax.

"We cannot avoid the debate on a tax on speculation. Whether we wish to restrain the frenzy of the financial markets, finance development aid or bring the poor countries into the fight against climate change, it all comes back to taxing financial transactions."

Joining the Davos offensive against the finance industry, he said: "There is indecent behaviour that will no longer be tolerated by public opinion in any country in the world.

"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."

Sarkozy said it was "morally indefensible" for people who destroy jobs and wealth to earn a lot of money.

"The banker's job is not to speculate, it is to analyse credit risk, assess the capacity of borrowers to repay their loans and finance growth of the economy."

But he said global imbalances also had to be put right.

Without naming China, much of his criticism appeared directed at the Beijing government.

"Countries with trade surpluses must consume more and improve the living standards and social protection of their citizens."

He said that currencies were "central to these imbalances" -- again taking up a widely made criticism of China.

"We cannot put finance and the economy back in order if we allow the disorder of currencies to persist. Exchange rate instability and the under-valuation of certain currencies militate against fair trade and honest competition."

The French leader said the world needed a new Bretton Woods -- the 1944 accord which set up the regulatory framework for international finance in the second half of the 20th century.

Until changes can be agreed, "we must prudently manage the adoption of measures to support activity and the withdrawal of surplus liquidities injected during the crisis. We must take care to prevent too abrupt a tightening that would result in global collapse."

AFP / Expatica

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