Friday, December 9, 2011

A Victory for France?

The Economist thinks France scored a victory in Brussels:

But especially for France, on the brink of losing its AAA credit rating and now the junior partner to Germany, this is a famous political victory. President Nicolas Sarkozy had long favoured the creation of a smaller, "core" euro zone, without the awkward British, Scandinavians and eastern Europeans that generally pursue more liberal, market-oriented policies. And he has wanted the core run on an inter-governmental basis, ie by leaders rather than by supranational European institutions. This would allow France, and Mr Sarkozy in particular, to maximise its impact.
Mr Sarkozy made substantial progress on both fronts. The president tried not to gloat when he emerged at 5am to explain that an agreement endorsed by all 27 members of the EU had proved impossible because of British obstruction. “You cannot have an opt-out and then ask to participate in all the discussion about the euro that you did not want to have, and which you also criticised,” declared the French president.
To which I am tempted to reply, "Another such victory and we are undone." This is, frankly, preposterous: all that Sarkozy has accomplished is to bind the Eurozone to constitutionally inscribed austerity. So Europe will embark on a lost decade, while the markets may--emphasize the conditional--choose not to precipitate the bad equilibrium for fear that this would at last provoke the ECB to act and wipe out the first intrepid speculators. If death by slow strangulation rather than a bullet in the back of the head is victory, then, indeed, France has won, and Germany too. "The Constitution is not a suicide pact," Justice Holmes famously said, but Merkel and Sarkozy have done their best to ensure that the Eurozone treaty is just that. Forgive them, Keynes, they know not what they do.

Environmental Regulation

In the wake of the Durban conference, Éloi Laurent offers two notes on Europe's success in regulating carbon emissions.

Sarkozy, the Police, and DSK

What did Sarkozy know about DSK's sexual habits? More than I did, no doubt, but even I had heard rumors before the arrest about clubs échangistes, soirées libertines, compromising photos, etc. And it seems that quite a few Socialists--including some, like the mayor of Sarcelles François Pupponi, who protested that the "Dominique" they knew could never have been involved in anything as sordid as the Sofitel affair--knew that the police knew, because Julien Dray had met with Bernard Squarcini, the head of les Renseignements Intérieurs, who had explicitly told him, and Dray allegedly informed Pupponi. And the omnipresent publicity consultancy Euro RSCG, now advising Hollande, seems to have been a key player in the contacts between DSK and Sarkozy's "Mr. Security," Alain Bauer (who eventually relayed the news of DSK's arrest from the Sofitel security chief to Sarkozy):
En mars, Dominique Strauss-Kahn a donné rendez-vous au Pavillon de la Reine, place des Vosges à Paris, à Alain Bauer.
Il est un intime de trente ans de Stéphane Fouks, le patron d'Euro RSCG. Il a participé, en 2007, à la réunion organisée par l'agence autour de Dominique Strauss-Kahn, avant son départ au Fonds monétaire international (FMI). Puis aux réunions de crise, en 2008, après sa liaison avec l'économiste hongroise, Piroska Nagy.
Alain Bauer est aussi devenu le "Monsieur Sécurité" très écouté du président de la République. Qu'importe. C'est lui que DSK veut interroger sur la fiabilité de son téléphone. "On me dit que les Blackberry ne sont pas sûrs ?" "Pas fiables du tout !, lui confirme Alain Bauer. Si tu veux être en sécurité, tu dois mettre une puce cryptée ici", explique-t-il en retournant le téléphone du patron du FMI, qui écoute et remercie.
All of this makes one wonder how DSK could ever have thought of running for president (he knew what they had on him) and how he could have behaved so recklessly even knowing what was bound to come out in the campaign. It's all quite revealing about the mores of la classe politique. Sarkozy knew, the PS knew, journalists knew, policemen knew, everyone who was anyone apparently knew that DSK was, in Sarkozy's words, "un obsédé sexuel." And yet the president pushed him for the IMF job, the PS would have nominated him as its candidate, and ... well, the possibilities are too grotesque to contemplate: un Parc aux cerfs moderne à l'Elysée among them. Perhaps the French could use some of that puritanism they're always mistakenly seeing in Americans.

Angela and Nicolas's Excellent Adventure

So, the dynamic duo have saved the euro yet again. Or have they? David Cameron is out, but no surprise there. The Brits--Tories especially--were never in, and they're not about to sign on now when the costs are clear and the benefits elusive. So, since a treaty change requires unity, the fallback is agreement by the Eurozone 17, which seems to be in hand. Mario Draghi says he's pleased, but he is still holding the purse strings tight. And his words yesterday were not very reassuring, as I noted in a previous post

Many analysts were stunned by what appeared to be Mr. Draghi’s turnaround, which they said would make it even more crucial for the European heads of state to forge a market-calming master plan at their summit meeting — as unlikely as such an outcome is starting to look.
“While Draghi had opened the door for more E.C.B. support last week, he closed it again today,” Carsten Brzeski, an economist at the Dutch bank ING, wrote in a note to clients. “According to Draghi, it was up to politicians to solve the debt crisis.”