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At Davos, Sarkozy Calls for Global Finance Rules

Published: January 27, 2010

DAVOS, Switzerland — France wants to use its presidency of the Group of 20 next year to create a new international monetary system, President Nicolas Sarkozy said on Wednesday, adding that he believed the dollar should no longer be the primary reserve currency in the global economy.

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Nelson Ching/Bloomberg News

Nicolas Sarkozy, speaking at the World Economic Forum, said, “We need a new Bretton Woods.”

Davos 2010

Davos 2010
DealBook: Davos Diary

Reporters and editors from The New York Times and The International Herald Tribune will be in Davos, Switzerland, reporting on the World Economic Forum from Jan. 27 to Jan. 31.

In an expansive and lofty speech to the business and political leaders gathered here at the annual World Economic Forum, Mr. Sarkozy also called for a “revolution” in international regulation that would make labor, health and environmental standards as enforceable as trade rules.

Like Prime Minister Gordon Brown of Britain, he backed a tax on financial market transactions. But Mr. Sarkozy, pursuing his call for a more moral form of financial capitalism, suggested the proceeds be used to combat climate change and create a World Environment Organization as powerful as the World Trade Organization.

Mr. Sarkozy also took a hard line on bankers’ bonuses, saying that lavish rewards should be denied to those who destroy wealth and jobs.

But before an audience that contained many Americans and many Chinese, his comments on currencies may have had the greatest resonance.

“We need a new Bretton Woods,” Mr. Sarkozy told a packed auditorium. “We can’t have on the one hand a multipolar world and on the other a single reserve currency on a global level.”

In a thinly veiled reference to China keeping its currency at an undervalued level, he added: “We cannot on the one hand laud free markets and on the other tolerate monetary dumping.”

During its 2011 presidency of the Group of 8 — the leading Western industrial powers plus Russia — and the wider G-20, which includes several important developing nations, France “will put the reform of the international monetary system on the agenda,” Mr. Sarkozy said.

Mr. Sarkozy also warned that the economic recovery currently under way remained vulnerable, urging central banks against withdrawing monetary stimulus measures too abruptly, saying it could prompt a collapse of the world economy.

"We must take care to prevent too abrupt a tightening,” he said.

Mr. Sarkozy's speech found few supporters among bankers and executives at a dinner here Wednesday evening. Some managers said his call for a new monetary system was merely an attempt to increase the importance of the euro and raise France's profile ahead of next year's Group of 20 meetings. Mr. Sarkozy's endorsement of plans put forward earlier by Britain to tax financial transactions also failed to stir the audience.

The powerbrokers at Davos were not Mr. Sarkozy’s only audience. Six weeks ahead of regional elections in France, which are widely expected to be at least partly a judgment on his presidency, the president has tried to reverse a decline in his approval rating, currently at a record low.

“It was an effective, quite populist speech,” said Timothy Garton Ash, a professor at Oxford and political commentator who was in the audience. “As always at Davos, national leaders are at least half talking to their own audience.”

In 2008, when France held the presidency of the European Union for six months, Mr. Sarkozy proved a dynamic — if controversial — leader, first negotiating a ceasefire that halted the war in Georgia with Russia, and then bringing together European leaders to coordinate their response to the financial crisis.

As president of the G-20, he could repeat that performance, and even observers who find his style at times overbearing applaud his tenacity and energy.

“The dynamism of the chair,” Mr. Garton Ash said, “may bring some more substance to the G-20.”

Mr. Sarkozy was the first French president to give the keynote address at the Davos forum, and it afforded him the chance to pit well-paid bankers against ordinary citizens.

He reiterated themes that have resounded in recent days, starting with President Obama, who proposed a tax on banks’ liabilities, and then went further, suggesting that their size should be limited.

The French president said he agreed with Mr. Obama, but stressed that all regulation concerning banks should be dealt with at an international level, coordinated by the G-20.

Calling the current crisis a “crisis of globalization itself,” he urged broad coordination of regulation and accounting rules.

“If competition is distorted by accounting rules that remain very different from one country to another, and one continent to another, market actors will find it normal to return to precrisis habits,” Mr. Sarkozy said. “How, in a competitive world, can we demand of European banks three times more capital to cover their risks in their activities and not ask the same of American and Asian banks?”

His aim was not, he stressed, to do away with capitalism itself but to tame financial markets. To this aim, a tax, he said, was now unavoidable.

“We can’t escape the debate about taxing speculation,” Mr. Sarkozy said. “Whether you want to rein in frenetic financial markets, finance development aid or associate poor countries to the fight against climate change, everything brings us back to the taxation of financial transactions.”

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