We all knew that when trying to second guess the French President, we would be dealing with a “known unknown”.  Which Sarkozy would we meet on any issue: the dynamic, highly intelligent and focused one or the egotistical, overbearing impetuous one?

So far, so very good.  His leadership on the financial meltdown has been excellent; inevitably bruising some egos.  His recent statements suggest that there will be some stormy times ahead, but real debate on real issues is what the EU needs.  Some Sarkozy developments:

• Franco-German axis: this has been condemned to the history bin, at least while Sarkozy and Merkel are in office.
• European sovereign wealth fund: Sarkozy has again proposed such a fund to acquire stakes in European companies and prevent foreign sovereign wealth funds from buying up European companies. Germany is opposed, preferring inward investment control measures.
• EU economic governance: Sarkozy proposes a “clearly identified economic government”. The ‘E’ in EMU does not exist. He wants regular Eurogroup summits (this month’s was the first ever) chaired by the head of a euro member state/government. He sees himself as the President for 2009 as neither Czech Republic nor Sweden have adopted the euro. Germany opposes this as it believes its economy is solid and does not need other protective measures.
• Global financial & economic governance: Sarkozy insists that a new global system is required as hitherto the exercise has been one of crisis management. A new regulatory system is needed as part of a radical reform of global capitalism. We are now moving from a financial crisis to an economic one. A “united European response” is essential: this does not mean the same response but requires “a toolbox, a roadmap, harmonization and coordination.

Bush has agreed, at Sarklozy’s request, to hold a series of global summits, beginning in Washington on 15 November with the G20.  Sarkozy says that the intention is to “recast the international financial system through better regulation and more effective supervision of all market operators to ensure that the current crisis does not happen again.”  Gordon Brown wants a so-called ‘Bretton Woods II’ conference. 

At this stage I will confine myself to a few brief comments:

• Germany is opposed to Sarkozy activism but vetoing an idea with broad support is another matter.
• There is a fear that Sarkozy wishes to promote French-style industrial policy, protectionism and government interventionalism.
• Third, there is also a fear that Sarkozy wishes to “over-regulate”.
• Fourth, Sarkozy does not exclude the UK attending Eurogroup meetings.
• Fifth,.there is clearly a need for greater economic coordination; how is the question.
• Sixth, the US may well find itself in the minority on global governance reforms, with the EU and China often in broad agreement.