Sarkozy's controversial 'interventionist' legacy

22nd November 2004, Comments 0 comments

PARIS, Nov 21 (AFP) - French Finance Minister Nicolas Sarkozy, expected to resign from the job this week after only eight months to lead the governing UMP party, leaves as he came: in a blaze of action.

PARIS, Nov 21 (AFP) - French Finance Minister Nicolas Sarkozy, expected to resign from the job this week after only eight months to lead the governing UMP party, leaves as he came: in a blaze of action.

But the man who makes little secret of his ambitions to be French president also leaves behind a legacy of controversy, in some areas hostility and in general a question: is he a state interventionist or a bold free-market reformer?

Sarkozy was parachuted into the key but risky finance post from the Interior Ministry to replace Francis Mer last March after a Socialist landslide in regional elections.

He had begun to clash with President Jacques Chirac and the job of dealing with the nation's deficit problem was seen as something of a poisoned chalice.

Now members of Chirac's governing Union for a Popular Movement (UMP) party are expected to elect him party leader, the next step on the ladder he hopes will take him to victory over the incumbent head of state in 2007.

His time at Finance has certainly not been without incident and he has managed to offend, in no particular order, French trade unions, Germany, Turkey and most of eastern Europe.

He has put in place a series of measures which could revive the country's flagging finances and bring the public deficit under control in a year when the government is banking nearly EUR 4 billion from privatisations, including those of airline Air France, jet engine maker Snecma and airport operator Aeroports de Paris.

"Everything will be done for growth and employment," Sarkozy promised when he was appointed and his only budget was based on predictions of a growth rate of 2.5 percent for next year and kept public expenditure at 2004 levels with a small margin for inflation.

The deficit would, if all goes according to plan, come in at just under EUR 45 billion (USD 55 billion), or 2.9 percent of gross domestic product (GDP), allowing France to fulfil its pledge to comply with the three percent rule laid out in the EU's Stability and Growth Pact that underpins the euro. The last time France was in conformity was in 2001.

Sarkozy, the 49-year-old son of a Hungarian refugee, is known to love a challenge but it was more his challenging nature which grabbed the headlines during his time in charge.

The trade unions were up in arms shortly after "Sarko", as he is universally known, was appointed over plans to privatise the national gas and electricity utility, EDF-GDF.

A mass strike meant he had to climb down, like many French ministers before him, bowing to the power of the unions - making him appear more socialist than the Socialist opposition.

In the event, he promised that the government would keep at least a 70-percent stake in EDF and hand back EUR 500 million (USD 613.7 million) of the privatisation proceeds to EDF to finance its industrial programme.

Sarkozy found himself tied by the twin demands of an electorate that usually expects the state to solve its problems but also having to mollify EU officials fed up with state intervention, but he chose domestic peace ahead of European harmony when he convinced Brussels to approve another state-led bailout of the French engineering group Alstom.

That, coupled with the snub to German electronics and engineering giant Siemens, which had sought to take a stake in Alstom, along aggressive promotion of a takeover of Franco-German drug firm Aventis by chemical giant Sanofi-Synthelabo, really riled the Germans. It also upset the Swiss since pharmaceutical group Novartis hinted strongly that it had been warned against making a counter offer for Aventis.

Sarkozy insisted that the state had a duty to intervene.

Over Eastern Europe, Sarkozy caused an uproar in September in the EU, especially in new member countries like Hungary, with a proposal to cut EU structural funds for the new members that have corporate tax rates below the bloc's average.

France and Germany in particular are concerned that low corporate tax rates in the new EU member-states were sparking a transfer of production and jobs to the east.

His brief reign at the ministry has also been marked by an avowed desire to create "industrial champions" capable of competing on a global stage and he has even took a swipe at the United States on Monday to reduce its trade deficit, reminding Washington it had signed a G7 position on exchange rate volatility.

And he was also less than complimentary about France's 35-hour working week, which he charged "costs EUR 14 billion (USD 17 billion) a year to prevent the French from working".

However, two of his last initiatives were to summon first the supermarket chains and then the banks to cut their prices or risk the consequences. This went down well with public opinion but raised concerns about authoritarian interference.

But a third was to give strong backing to a report which he had commissioned and which amounted to a blueprint for radical reforms throughout the economy.

Sarkozy came to his recent ministerial career with the image of being a hard-line liberal, the French term for proponent of free-market policies, and the current government was elected on a market-reform platform.

But he has worked hard to tone this down and is now ranked one of the most popular politicians in the country.

Some analysts wonder whether he is in fact an old-style believer in state interventionism or is using populism to sweeten the reforms he would like to apply.


Subject: French News

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