Sarkozy backs Obama in battle with banks
French President Nicolas Sarkozy threw his weight Wednesday behind Barack Obama’s clampdown on bankers, opening an annual Davos meeting dominated by a battle over post-crisis regulation.
In the keynote speech at the start of the World Economic Forum (WEF) meeting of political and business chiefs, he said globalisation had “skidded out of control” and lashed out at the “indecent” pay for finance executives.
“President Obama is right when he says that banks must be dissuaded from engaging in proprietary speculation or financing speculative funds,” he said in a stinging attack on pure free market idealism.
“From the moment we accepted the idea that the market was always right, and that no other opposing factors need be taken into account, globalisation skidded out of control,” he said.
Sarkozy is one of 30 presidents and premiers and 2,500 business and academic elite attending the 40th anniversary forum seeking to dispel new storm clouds hanging over the global economy.
The global elite gathered only days after Obama galvanised debate by vowing to limit “excessive” risk-taking and prevent banks or financial institutions from owning, investing in or sponsoring hedge fund or private equity funds.
The movers and shakers in Davos can take succour from new International Monetary Fund (IMF) forecasts that world growth will be stronger than expected in 2010.
But the main focus is on reform of the finance industry, with top bankers making a return to Davos to fight what they fear will be over-regulation.
The head of British finance giant Barclays Robert Diamond was among the first speakers to defend big banks here, saying forcing them to downsize would not avoid a repeat of the financial crisis.
“I have seen no evidence … to suggest that shrinking banks and making banks smaller and narrower is the answer,” he told the forum.
Finance legend George Soros weighed in by calling Obama’s plan to clamp down on banks premature.
But joining the Davos offensive against the finance industry, Sarkozy said: “There is indecent behaviour that will no longer be tolerated by public opinion in any country in the world.
“There are remuneration packages that will no longer be tolerated because they bear no relationship to merit,” he added.
He also warned: “It will not be possible to emerge from the crisis and protect ourselves against future crises, if we perpetuate the imbalances that are the root of the problem.”
The banking industry is arguing against what it considers stifling controls, while bank leaders are also on the defensive about bonuses.
Sixty percent of chief executives are “extremely” or “somewhat” concerned by the threat of over-regulation, said a poll by PriceWaterHouseCoopers released in Davos.
European Central Bank chief Jean-Claude Trichet offered support to the Obama plan, although in an interview with the Wall Street Journal he said there must be global coordination of reforms.
The WEF said in a report that banks would have to rethink their business models and accept “a lower profit world” and review their salaries.
The IMF on Tuesday projected global growth of 3.9 percent in 2010, raising its original estimate of 3.1 percent, but said emerging economies, particularly in Asia, would lead the recovery.
However the UN’s International Labour Organisation revealed that global unemployment had surged to a record 212 million people — up 34 million in two years — and would remain high in 2010.
“We need the same policy decisiveness that saved banks now applied to save and create jobs and livelihoods of people,” ILO director general Juan Somavia said ahead of the Davos meeting.
International shock at the extent of the Haiti quake disaster has also been reflected with several last minute changes to the Davos programme so rebuilding efforts can be discussed and new appeals for help made.
Among other leaders present here are presidents Luiz Inacio Lula da Silva of Brazil, Felipe Calderon of Mexico and Jacob Zuma of South Africa — who used a media lunch to plug the upcoming football World Cup in his country.
Source: AFP