Tuesday, October 21, 2008

"Economic Government"

President Sarkozy has called for an "economic government" for the Eurozone. "If the European Central Bank must be independent," he says, then "it must be able to enter into discussions with an economic government." Like so many of Sarkozy's proposals, the grand and the vague are present in equal doses, and it is easy to suspect ulterior motives. To be sure, some continuity and greater coordination than exists at present might be useful features of economic policymaking in Europe, and Sarkozy's belief in the need for a counterweight to to the ECB is well known. Enlargement has made the coordination issue acute, and the leaders of large economies, especially the old French-German tandem, might well wish for a central economic institution in which influence would be apportioned by GDP rather than population or nationality. The current crisis has highlighted the need for rapid response, just as in the foreign policy realm. It will be interesting to see if Sarko's proposal gains any traction.


Several commenters to my previous post about DSK's troubles at the IMF suggested that the disclosure of the investigation was a deliberate attempt to oust him from the post because he favors stricter regulation of international finance. I was initially skeptical. But now it seems that the Wall Street Journal really is out for his scalp. They have broken a second story about supposed nepotism in the appointment of a young intern--a matter too trivial to have spilled ink over, one would have thought. They are also raising the issue of a double standard (h/t Boz), asserting that while they see nothing in DSK's behavior that would warrant removal, the same can be said, in their opiniion, of Paul Wolfowitz's behavior, and he was removed, so DSK should go too. Although such partial logic is characteristic of the WSJ editorial page, it is hard to avoid the inference here that they wouldn't be devoting so much attention to the matter if they didn't feel there was something at stake in pushing the Frenchman out. There is also the question of the timing of the article, since several journalists, including Charles Bremner and Jean Quatremer, have said that they were alerted to the accusations against DSK by the woman's husband months ago and chose not to write about it. The WSJ would have heard the same rumors and sat on the story, presumably not considering it important enough to bother with until the presence of a pro-regulation IMF head became a more salient concern.

French observers should refrain from attributing these charges to "American puritanism," however. In fact, DSK's frasques have barely made a ripple in the US press. The public is indifferent, and virtually no one outside the Beltway knows his name. This is a purely inside play.