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O 101549Z APR 09
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6017
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
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RHEHNSC/NSC WASHINGTON DC

UNCLAS SECTION 01 OF 02 PARIS 000519 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EUN PREL FR
SUBJECT:  OUT-TAKES ON G20 SUMMIT 
 
¶1. (SBU) SUMMARY:  Economics and Foreign Affairs Ministry contacts 
confirm the GOF is satisfied with the unity and balance achieved at 
the G20 summit in London, calling President Obama's role 
"constructive" on key areas for the French.  The GOF supported the 
U.S. proposal to triple IMF resources largely because it was so 
important to the U.S., but has concerns about monitoring and 
governance.  President Sarkozy will continue to press for high-level 
engagement on the renewing Doha trade talks, motivated by the 
downturn in world - and French - trade. END SUMMARY. 
 
¶2. (SBU) On April 7, Director General of the Treasury and Economic 
Policy (Treasury DepSec-equivalent) Ramon Fernandez told Acting DCM 
that the GOF is basically happy with the results of the G20 Summit 
in London.  He said the G20 showed cohesion and avoided 
confrontation between those pushing reform and those pushing for 
stimulus, which had been caricatured in the press.  IMF Director 
General Dominique Strauss-Kahn had called for recovery first, 
followed by regulatory reform but the GOF does not agree, just as it 
did not accept EU reproaches over French public budget deficits, 
expressed at the EU summit in Prague.  That said, the GOF will 
review the situation and introduce further stimulus measures if the 
French economy does not begin to recover, as expected. 
 
¶3. (SBU) Fernandez said the Elysee found President Obama's mediating 
role on non-cooperative jurisdictions "very constructive."  In a 
separate meeting with the Foreign Affairs Sous-sherpa's staff, 
DAS-equivalent for International Economic Affairs Paul-Bertrand 
Barets indicated GOF's satisfaction with positive movement, before 
and after London, on the issue of non-cooperative jurisdictions.  He 
noted that the GOF alone had signed 12 bilateral conventions in 
recent months.  More generally, Fernandez said the GOF sees 
President Obama and Secretary Geithner as being largely in agreement 
with the GOF on the regulatory issues.  While several of these, such 
as hedge funds and tax havens were not necessarily causes of the 
financial crisis, he said the GOF has taken the view that if it 
doesn't act on these issues now, when there is an opening for 
change, it will never get the changes it wants.  Areas where the GOF 
would like to go further include accounting rules and 
securitization.  Fernandez noted that FASB was going ahead with 
changes in the U.S. while the IASB is holding back on reform of 
accounting rules affecting European countries, an imbalance that 
would have to be corrected some how. 
 
New French Interest in the Trade Agenda 
--------------------------------------- 
¶4. (SBU) On trade, he said that President Sarkozy had pushed for 
head-of-state intervention, and took on board President Obama's 
statement that it is too early.  The GOF hope to see further 
discussion of this issue in Sicily in the expanded ("G-14") portion 
of the G8 Summit in July.  Queried on growing French interest in 
promoting Doha, Fernandez noted that at the end of 2008 President 
Sarkozy had called for "taking up the issue again."  He attributed 
the change in approach to the fragility of the world economic 
situation.   In the context of strong growth, a deal that did little 
for France or Europe was less interesting than today with the world 
economy shrinking 5-8% annually.  He clarified that the issue is not 
yet "ripe" and needs further discussion. 
 
International Financial Institutions 
------------------------------------ 
¶5. (SBU) The GOF "accepted" the tripling of IMF resources because it 
was so important to the U.S., even though the GOF has doubts about 
the ability to actually obtain these resources and about the message 
this sends regarding fragility of the financial system.  MFA staff 
said the GOF has concerns about effective use of new drawing rights 
and looks forward with interest to the IMF report on the subject 
that is due in fall of 2009.  On IFI/MDB governance, Fernandez noted 
that only the U.S. Sherpa opposed language stating that the heads of 
these institutions should be chosen without regard to nationality. 
For the GOF, this was not a serious problem, if a bit bizarre.  He 
said that U.S. acceptance of this principle, whenever it comes, 
would be "a useful signal" to many emerging partner countries, who 
appear less than totally committed to multilateral approaches. 
Developing this further, Barets asserted that treating reform of IFI 
governance purely as a matter of "correcting" European 
 
PARIS 00000519  002 OF 002 
 
 
overrepresentation is "oversimplified" and said the GOF is very 
interested in U.S. proposals on the issue. 
 
Emerging Economies 
------------------ 
¶6. (SBU) On Central Europe, Fernandez said, the situation is 
ambiguous and complicated, confirming that the countries involved 
resolutely refuse anything but case-by-case treatment.  At the same 
time, he said it was not necessarily logical to undertake certain 
measures (rollover etc.) with the private sector in Hungary, for 
instance, and not in other countries.  Resources for EU members had 
been increased to 50 billion euros, even though almost 10 billion 
euros remained of the first tranche.  He stressed that early entry 
into the euro zone is not a solution.  The EU is consulting on 
whether and under what circumstances it should increase its facility 
for neighboring countries, such as the Ukraine.  The GOF and other 
EU member states want to discuss the matter of central and eastern 
Europe further in the spring Bank-Fund meetings, he said. 
 
¶7. (SBU) Concerning other emerging countries, Fernandez said it was 
not particularly productive to speak of a distinct "crisis."  He 
characterized as "positive" the IMF's work with lines of credit, for 
instance for Mexico.  For many other cases, he said that there may 
be nothing to do but watch, wait and be prepared rapidly if and when 
it becomes necessary.  He agreed that there are quite a number of 
vulnerabilities in the system which could compound one another under 
certain circumstances. 
 
¶8. (SBU) Comment:  Given his past tenure as deputy economic advisor 
to President Sarkozy and his close relationship with G20 Sherpa 
Xavier Musca, we take Fernandez's assessment to be definitive.  End 
Comment. 
 
PEKALA