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Walker's World: Sarkozy and the Britons

Still, it is pleasant for Sarkozy, who also can claim that, alone among the Group of Seven economies, France is not in recession, at least by the conventional standard of two successive quarters of negative growth. The French economy, to the delighted surprise of the government, managed to grow by 0.1 percent in the third quarter of last year. But it certainly shrank in the fourth quarter, and analysts at the bank BNP-Paribas say it will shrink again by at least 2 percent this year.
by Martin Walker
Paris (UPI) Jan 7, 2009
When French President Nicolas Sarkozy meets former British Prime Minister Tony Blair in Paris Thursday for a conference on morality in the markets, he will be wearing a patriotic smile.

This is not just because he is in power and Blair is not. Nor is it solely because of Sarkozy's high-profile marriage to the attractive former model and songstress Carla Bruni. It is because for the first time since Tony Blair became prime minister nearly 12 years ago, the French economy is now larger than Britain's.

This is wholly the result of the fall in the value of the pound and the rise of the euro, which distorts all such calculations based on the dollar value of a nation's gross domestic product. Under this rather unreliable system, the economy of the European Union is currently about 20 percent larger than that of the United States. Give or take a few months, the relative values of the euro and dollar will doubtless shift again.

Still, it is pleasant for Sarkozy, who also can claim that, alone among the Group of Seven economies, France is not in recession, at least by the conventional standard of two successive quarters of negative growth. The French economy, to the delighted surprise of the government, managed to grow by 0.1 percent in the third quarter of last year. But it certainly shrank in the fourth quarter, and analysts at the bank BNP-Paribas say it will shrink again by at least 2 percent this year.

Unemployment has jumped by 161,000 to rise above the politically sensitive threshold of 2 million again. France, like the whole of the EU, is heading into a deep recession. Despite a level of government debt that is set to rise from 66.7 percent of GDP last year to 69.1 percent this year, Sarkozy already has announced $30 billion in stimulus spending and this week signaled that he is ready to go deeper into debt to pump yet more cash into the faltering economy.

It is surprising that Blair and Sarkozy have time for this week's two-day conference, given their other focus on the Middle East crisis. Blair is the envoy of the Quartet (the United States, the EU, the United Nations and Russia), and Sarkozy this week is making a whirlwind tour of Egypt, Israel, Syria and Lebanon in the hope of brokering a cease-fire.

"There are times when Nicolas Sarkozy resembles a force of nature rather than a conventional political leader," Blair noted last week in Time magazine. "He has put France on the map. He has a high profile and a real standing in the world. You agree or disagree with him: You can't ignore him. This is not to be underestimated in modern politics. It gives a country traction, it draws in allies, and it helps create a sense that other countries need to befriend a nation on the rise, one whose view counts."

Beyond Sarkozy's hyper-energetic profile, and his determination that France and Europe should play a significant role in the world, what is striking is the degree to which he leans toward the Anglo-Saxons. He and Blair have become personal friends, and he worked (and works) closely with Blair's successor, Gordon Brown, on financial crisis management. He went out of his way to smooth over relations with the Bush administration.

This partiality for the Britons has set tongues wagging in Paris, Berlin and in the EU capital of Brussels, where the Franco-German alliance has been the main driving force of the European Union for the past 40 years and more. Significantly, it still sometimes is called the Paris-Bonn axis, although Bonn is no longer the capital of West Germany but a small Rhineland town in a united Germany whose capital is once again Berlin. France and Germany are no longer equals. But Britain and France, with similar populations of around 60 million, similarly sized economies, serious military forces and nuclear weapons, have rather more in common than either does with Germany.

Sarkozy and Brown have pushed hard against German opposition for more stimulus packages, including the plan for the EU's own coordinated $200 billion scheme. It seems to be working, although the imminence of Germany's election later this year also may help explain this week's belated and reluctant decision of the Berlin coalition government to discuss a $50 billion stimulus package spread over the next three years. Now with this week's conference, Sarkozy and Blair are seeking to set the agenda for global regulatory reform, based on restoring fairness, transparency and clear moral responsibilities to the discredited global financial system.

"There is no system of wealth creation without a system of values, and this value system has been badly shaken," Eric Besson, France's policy planning minister (and a former Socialist), told reporters last week. "Those who want to defend the virtues of free market capitalism must at the same time demand a balance of rights and responsibilities from top executives. Setting an example matters."

"People are prepared to accept others getting high pay and enjoying different lifestyles, but only if they have the feeling that the system is fair and that the law is the same for everybody," Besson added, noting that France saw an opportunity to bring the United States into the reform process.

"I think the accession of Barack Obama is going to create an extraordinary window of opportunity," he said. "From what I have heard, he talks the language of regulation."

Whatever language of reform and regulation the British and Americans speak, Sarkozy seems ready to go along, while translating it with a special French flair and making himself the symbolic leader of the Europeans in the process.

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Military Matters: Russian ally -- Part 2
Washington (UPI) Jan 6, 2009
According to the Nov. 14 Financial Times, Russian President Dmitry Medvedev, speaking to a group of Russian and European business leaders before flying to Washington for a visit, said Russia could develop "neighborly and partnership-based relations with the U.S."







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