Tuesday, November 4, 2008

Juncker Self-Criticism

Jean-Claude Juncker has said that Europe badly misunderstood and therefore mismanaged the financial crisis, "which we did not think would affect us." Jean Quatremer thinks this shows that Europe falsely believed it had achieved economic independence from the United States. That may indeed be the correct interpretation of Juncker's remarks, but, if so, I think it still reflects a misunderstanding of the nature of the crisis. For what is beginning to emerge, I think, is a set of European financial problems that are rooted in Europe and not mere side-effects of the ingestion of toxic American assets. European banks used the same "credit enhancement" techniques and structured investment vehicles as the United States. European banks built derivatives on top of derivatives and made risky loans backed by shaky analyses. European banks innovated as aggressively as American banks. At least there are signs that this is the case. We know less to date than we now know about American practices, but all signs are that the mispricing of risk was not limited to American institutions. While Europe has been congratulating itself on quick and coordinated responses, it has been keeping many details out of public view. Just as it was convenient for antiglobalization forces on the left to attack "Anglo-Saxon neoliberalism," so is it convenient now for reeling continental neoliberals (including Sarkozy and Lagarde as well as Juncker) to blame Anglo-Saxon toxins for homegrown ills.

Sarko Studies Obama

Sarkozy is said to be studying the Obama campaign closely for hints on how to approach his re-election as well as the renovation of the UMP. I suppose that Le Monde is correct to observe that there are many technical trucs that can be picked up about how to organize Web sites and Internet fundraising, script and target commercials, sample voter sentiment, and so on. But the heart of any campaign is the candidate, and as candidates Obama and Sarkozy are quite different. Obama is cool, disciplined, unflappable; Sarkozy is excitable and pugnacious. Obama, despite his intellect, avoids wonkishness in debate, whereas Sarkozy, who knows all the dossiers, likes to display his command of details. Sarkozy drips with contempt for opponents and, sometimes, supporters. Obama, one suspects, may feel contempt but never lets it show through. Sarkozy may think of himself as an outsider in French politics and bear resentment against the establishment, while Obama, though in obvious ways even more of an outsider, also made his way through elite schools and has never posed as an anti-elitist. He nevertheless enjoys the robust support of minorities, the real outsiders in American society, whereas Sarkozy has made a career of provoking their opposition.

Let's see what lessons he learns.

Times on French Film

Michael Kimmelman in the Times today gives a pretty fair survey of recent trends in French film. Ignore the title, which is a little overdrawn, and get on with the substance of the piece, which is fairly decent and, for once, turns to an authentic expert, Antoine de Baecque, who knows cinema, rather than Bernard-Henri Lévy, who made what has been called the worst French film ever and therefore might have been expected, given the Times' usual preferences, to have been presented as the country's foremost authority on cinema as well as everything else.

The Ultimate Consecration

Sarko has achieved the ultimate consecration: a reference to his sexual prowess in an American TV serial.

Via Marianne.

The European Mortgage Crisis

Germany's Commerzbank is going to draw down 8.2 billion euros from the German bank stabilization fund. This comes after last week's announcement that Hypo Real Estate would seek 500 billion euros in aid from the German government. 500 billion euros, even at today's exchange rates, comes close to the $700 billion US bailout package, but propped up by a much smaller German economy.

RSA in Comparative Context

At La Vie des Idées, Jean-Claude Barbier has an interesting piece on what is variously termed workfare, welfare-to-work, or social activation policy, and he analyzes the RSA in this context.

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.