Tuesday, November 4, 2008

Sarko Rebuffed

Eurozone finance ministers have rejected the Sarkozy-backed idea of a joint stimulus package at the EU level and will instead rely on loosely coordinated national policies. There are several ways to interpret this development.

This being a Franco-centric blog, it is of course tempting to see the development in Sarko-centric terms, but that would probably be a mistake. To be sure, Jean-Claude Juncker is probably savoring his victory in the long guéguerre with Sarkozy, but the result is overdetermined. The EU does not have the institutional resources to manage economic policy at the transnational level. It can't tax and it can't spend. So an intergovernmental implementation was always in the cards.

What influence will Sarkozy have? His thinking on appropriate stimulus spending is not clear. His most definitive move to date has been the promise of 100,000 subsidized jobs, a palliative that other states are not likely to emulate but that is squarely in the French tradition (of both left and right over the past 20 years). Germany, with its export orientation, is no doubt pleased with the euro's fall against the dollar and, with its traditional wariness of inflationary policies, may hope that that alone will suffice to spur its economy.

There has not yet been a formal suspension of the Maastricht stability and growth rules, but it seems likely that many states will soon violate the 3 pct. deficit limit. Of course the rules permit temporary deviations even without a suspension. Not that there's any enforcement mechanism. But perhaps something more explicit will be forthcoming after the G20 meetings.


Anonymous said...

To me the most disturbing aspect of the crisis is how quickly European unity came unglued under pressure. Even the re-capitalization of the banks looked like it was coordinated by the US (after being suggested by the UK). It almost looked like it was easier for the European countries to deal with the US individually, than to coordinate a response among themselves. It makes me wonder if it's really the case that the Bush administration is the main cause of the lack of global cooperation. Will Merkel and Sarkozy start agreeing once Obama is president?

MYOS said...

I thought that some French politicians were in favor of eschewing the Maastricht stability/growth compact?
The two I can think of aren't influential though - Hamon, Guaino - so it may be a marginal minority position.

A joint stimulus packaged seemed to make sense on paper but difficult to put into practice.
Like so many of Sarkozy's ideas, though.

Any news on Sarkozy's plan to remain "President of Europe" (ie., of the Eurozone)?
Can this rejection be interpreted as a likely rebuke on the "president of Europe" idea?