Saturday, September 15, 2007


President Sarkozy, stimulated perhaps by a brief visit to his ancestral homeland, was quite talkative on the flight home from Budapest after a 7-hour visit yesterday. "Mitterrand traveled for pleasure," he said. "I'm not criticizing. I travel to get things done." Among the things he got done while in Hungary was an apology of sorts for the dressing-down Chirac administered to the countries of the East who supported the US on the invasion of Iraq: "They missed a good opportunity to keep their mouths shut," Chirac had said, but Sarko, who in other contexts has been stingy with apologies, showed no reluctance in saying that France doesn't distinguish between the great and small nations of Europe. The important thing is to get Europe moving again.

To that end, he had some harsh words--again--for the European Central Bank: interest rates too high, too ready to bail out irresponsible lenders and borrowers in the current liquidity crisis. Jean-Claude Trichet lost no time in firing back. Of course all the sniping serves both sides rather well. The ECB maintains its commitment and gains credibility as a resister of political pressure; Sarko wins a few points with entrepreneurs and debtors. Of course the ECB will soon face a decision. With the Fed expected to lower the fed funds rate on Tuesday by 25 to 50 basis points, the ECB will have to weigh the consequent upward pressure on the euro, which is already at a historic high against the dollar. If it appreciates further, Sarko will have all the more reason to keep sniping, and even the Germans may begin to worry that the brake on growth has become tight enough to take some risk with inflation by dropping the European interest rate (or, more likely, foregoing a planned rate hike).

He also blasted Eurogroup head Jean-Claude Jüncker, the finance minister of Luxembourg, whom he had helped put in place. "What initiative has he taken" in the liquidity crisis? Sarko asked, while suggesting that he and Merkel had taken the lead while Jüncker did nothing. As for his relations with Merkel, he insisted, despite rumors to the contrary, that they had never been better. "The problem," he said, "is that she has to deal with the Länder and her coalition. I can go faster." And just to top things off, he said that it hardly mattered if French growth had dropped from 2.3 to 1.9 percent, because "I want 3 percent." And next week he would be announcing initiatives intended to achieve that. Voluntarism, confidence, chutzpah--the qualities that have gotten Sarkozy where he is remain abundantly on display, which is just where he wants them.

LATER: More here from Jean Quatremer. It's amusing to compare Sarko's blasts against Trichet with Greenspan's blasts against Bush in his just-published memoir. Central bankers and presidents are made for misunderstanding, it seems--Bush and Sarko more than most, however. Maybe that's why they get on so well: neither has much of a gift for seeing things from the other fellow's point of view, particularly if the other fellow is a central banker.

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