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O 061706Z FEB 09
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5515
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UNCLAS SECTION 01 OF 02 PARIS 000197 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PREL FR
SUBJECT:  SARKOZY ADDRESSES FRANCE ON THE ECONOMY 
 
¶1.  (SBU) Summary:  In a 90-minute broadcast on the economic crisis, 
President Sarkozy said he and German Chancellor Merkel will insist 
on "structural change" in the international financial system at the 
G20 Summit in London.  France must focus on employment to get out of 
the crisis, he said, inviting business and unions to meet February 
18 to discuss ways to reduce the negative impact of the crisis on 
the most vulnerable members of society. End summary. 
 
¶2.  (U) One week after more than a million people participated in 
nationwide demonstrations focused on the economic crisis, President 
Sarkozy invited a small panel of journalists to the Elysee Palace 
for a 90-minute serial interview on the crisis and his plans to 
manage its social impact.  Questions and answers were interspersed 
with street interview footage of French citizens who expressed their 
complaints, fears, expectations and comments. 
 
International Approaches Needed 
------------------------------- 
¶3. (U)Stating that he had imposed the November G20 Summit on 
Washington, Sarkozy said that he and Chancellor Merkel will insist 
on structural changes to the international financial system at the 
April London Summit.  He recognized that the U.S. is the "top world 
power" but insisted that France and the EU "won't pay the U.S. 
debt," and that the U.S. "cannot come to London and insist that 
everything continue as before."  He said he has "zero room to 
negotiate" on measures concerning tax havens, explaining that the 
enormous private wealth as well as debt and toxic assets that they 
concealed can be destabilizing to the international financial 
system.  He called for the creation of global economic governance 
either through the IMF or a "college" of supervisors of banks and 
financial actors, insisting that all financial institutions, 
including hedge funds and special investment vehicles, needed to be 
regulated.  He sharply criticized rating agencies' "detestable" 
performance and said work was needed on remuneration, including for 
traders. 
 
Europe Needs to Speak Up 
------------------------ 
¶4. (U) When asked about the EU's role, Sarkozy stressed the need for 
EU members to "pull together" with "discipline and solidarity." 
This was essential, he said, both to defend the euro and to defend 
European values in the remaking of the international economic 
system. 
 
Domestic Management of the Crisis' "Social" Impact 
--------------------------------------------- ----- 
¶5. (U) Sarkozy expressed sympathy for the plight of the most 
vulnerable in society who are suffering from the crisis through no 
fault of their own.  He defended support provided to banks, 
stressing that it didn't cost taxpayers "one centime" and the 
interest payments would provide an additional 1.4 billion euros for 
social programs.  The key is to encourage employment, which would be 
created by the infrastructure projects and incentives for innovation 
that are in the government's stimulus package.  He said he rejected 
a consumption-oriented stimulus package, citing the UK VAT-reduction 
experiment as evidence that it wouldn't work.  That said, he favored 
a targeted reduction of the VAT to encourage investment, e.g., in 
"green" vehicles and buildings.  He also said he would continue his 
reform agenda, explaining to his audience that the over-sized state 
was a drag on the dynamic private economy. 
 
Consultation with the "Social Partners" 
-------------------------------------- 
¶5. (U) Sarkozy announced a February 18 meeting at the Elysee for 
business and unions to address the social impact of the crisis. 
Further steps on unemployment, the working poor, the business side 
of employment, and profit sharing will be the focus.  If these 
"social partners" reach agreement, he will take their proposals on 
board, otherwise, Sarkozy said, the GOF will legislate a solution. 
On unemployment, for instance, he asserted it is better to keep 
workers on the payroll part time than to lay them off.  He suggested 
that low-wage workers needed more help which might be possible 
through a combination of child subsidies and income tax breaks.  In 
order to encourage hiring he proposed eliminating the locally 
collected "professional tax" on business assets that makes French 
firms less competitive.  Sarkozy said such steps were critical to 
 
PARIS 00000197  002 OF 002 
 
 
reducing industrial outsourcing.  Emphasizing the need for 
profit-sharing, Sarkozy said there should be a discussion of how 
profits are apportioned between shareholders, investment and 
employees, though the appropriate level might not be national but 
rather at the company or the sector level. 
 
Reactions 
--------- 
¶6. (SBU) French union leaders cautiously welcomed the president's 
proposals but also noted that most of them didn't go far enough to 
help workers.  Most unions would like to see more 
government-sponsored jobs and an increase to the minimum wage. 
President Sarkozy specifically ruled out a minimum wage increase 
during the broadcast, saying it would not help enough people. 
Representatives of the business community have not yet spoken out, 
but in recent conversations with Embassy have expressed concern 
about governmental "meddling" in private business matters (e.g., 
remuneration) in its efforts to be pro-active on the crisis. 
 
¶7. (SBU) Comment:  The president's meeting with unions and business 
on February 18 is a way of getting concern over the economic crisis' 
social impact off the streets and onto the negotiating table.  In 
vintage Sarkozy fashion, the president bruited some vague proposals 
for the meeting with populist rhetoric to take some of the wind from 
the opposition's sails.  Because shareholders had insisted on 
"ridiculous" returns "on the backs of workers," profit-sharing would 
be one theme of the upcoming consultations (the president said he 
thought an even split among shareholders, employees and reinvestment 
might be an appropriate rule-of-thumb for the disposition of 
profits).  How much of Sarkozy's populism reflects his world view, 
and how much is political gambit, is not always clear, we suspect, 
even to Sarkozy himself.  But the president's ability, and 
willingness, to claim victory when the mountain gives birth to a 
mouse will likely be at a premium as he navigates the months to 
come.  For now, Sarkozy, speaking without notes, demonstrated a 
mastery of the details of France's economic performance in turning 
questions into opportunities to get his points across and to 
reassure the French public that everything possible was being done. 
End Comment. 
 
¶8. (U) The full interview of President Sarkozy (no translation) can 
be viewed at www.elysee.fr. 
 
PEKALA