Financial Daily from THE HINDU group of publications
Friday, Jun 11, 2004
Industry & Economy
'Intervention in business is my duty' Sarkozy ruffles industrialists' feathers
The French Finance Minister, Mr Nicolas Sarkozy.
Brussels , June 10
THE European Union is passing through a phase of quandary over its quest to boost economic growth, control inflation and above all create employment, as on an average nearly nine per cent of the European workforce is unemployed and lives off social security handouts and causing a deep dent in revenue income of member States.
The other day, the chief of Volkswagen - Europe's largest auto company - criticised the role of politicians in devising corporate and industrial strategy and both the Italian Prime Minister, Mr Berlusconi, and the French Finance Minister, Mr Nicolas Sarkozy, criticised the European Central Bank for inaction.
Mr Sarkozy - now aged 49 is widely rated as Europe's dynamic and imaginative finance minister who also has his eyes glued on the French Presidency in 2007. He is often seen as "uncrowned Czar'' of French fiscal, industrial and strategic policy to boost economic growth and reduce unemployment first in France and then at pan-European level.
Hence, many eyebrows in key European financial capitals were raised on Wednesday when Mr Sarkozy said "intervention'' in business was ``his duty'' and criticised the European Central Bank for just focusing on its self-declared inflation target of "below but close to two per cent'' more than the need to boost economic growth which is languishing below one-and-half per cent amid spectre of high unemployment.
Mr Sarkozy became France's Finance Minister only two months ago and when he accepted his post he described himself as "kind of iconoclast'' new Europe needs first to back away from its cushy and traditional welfare State and embark on policies of imaginative and daring free enterprise. More prominent European politicians have mused about the prospects of structuring giant pan-European high-tech conglomerates with a global vision.
Chancellor Schroeder of Germany, who has so far miserably failed to structure a bold strategic economic and industrial policy to boost languishing German economic growth, said Mr Sarkozy's approach was too "nationalistic''. He has obviously ruffled feathers and managed to spark criticism from France's close ally and neighbour Germany.
However, European industrialists and observers are "more than impressed'' with Mr Sarkozy who in April personally stepped in to stop the merger of a leading French drug manufacturing firm and its German rival. Later, he promised more than euro four billion of taxpayer's money to rescue one of France's largest turbine and train manufacturer Alston SA on whom Germany's Siemen AG was casting eyes to buy its assets. Hence, the German Chancellor said that the French Finance Minister was pursuing "extremely nationalist policies''.
Other day the French President and the German Chancellor stated both countries should work together to create "pan-European industrial champions'' but Mr Sarkozy's bold attempts to protect French jobs have irked many German industrialists.
Often rated as "hands-on'' man of the people, Mr Sarkozy is blessed with good looks and telegenic personality. He claims that he has broken the mould of France's elitist leaders. For example, as a highly motivated Home Minister Mr Sarkozy tried to contain the challenges posed by Frenchmen's hard drinking, fast driving and slack policing.
He is also a prominent French Government official who has championed the cause of France's less than seven million Muslim population, when he was Mayor of Paris - a prestigious, powerful political and social platform in the French establishment.
Latest opinion reveals that 60 per cent of the French population has positive view of Mr Sarkozy compared with 51 per cent for President Chirac and 37 per cent for the French Prime Minister Mr Raffarin.
The argument for creating "pan-European industrial champions'' has been received with mixed feelings on both sides of the European political and business fence but there is growing frustration about lacklustre European economic growth and high unemployment.
Mr Berlusconi who is also Italy's richest business and media tycoon and pursues centre right political agenda said that if the European Central Bank did not lower interest rates a political committee should be set up to guide its decision making. Italy's economy is slowest growing in the Group of 7 richest industrial countries and could go below one per cent mark this year.
Economic strategists at prominent European banks like Mr Kamal Sharma at Dresdner Kleinwort stated that Mr Berlusconi's comments must be put into the context of forthcoming elections in Italy. The President of the European Central Bank, Mr Trichet, said the European Central Bank is keeping all options open.
The European stocks fell as the spectre of rising interest rates spooked investors. The dollar gained on the euro and pound sterling in the wake of hawkish comments by the US Federal Reserve chief Mr Greenspan. But there is general stability in the markets on both sides of the Atlantic after oil prices closed at six-weeks low, raising expectations that lower oil prices will reduce fuel costs and boost economic growth and corporate profit.
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