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International financial crisis

International financial crisis

Published on October 1, 2008
Speech by Mr. Nicolas Sarkozy, President of the Republic (excerpts)

Toulon, 25 September 2008

I wanted to speak to the French this evening because our country’s situation demands it. I realize the responsibility which rests on my shoulders in the exceptional circumstances we find ourselves in.


An unprecedented crisis of confidence is rocking the global economy. Major financial institutions are threatened, millions of small savers in the world who have invested their savings on the stock market are seeing them melt away, day after day, millions of pensioners who contributed to pension funds fear for their retirement, millions of modest households are being put in a difficult position by the rise in prices.

Like everywhere in the world, the French fear for their savings, their jobs and their purchasing power. (…)

The French want the truth, they’re ready to hear it. If they feel we’re hiding something from them, doubts will grow. If they are convinced we’re not hiding anything from them, they’ll find in themselves the strength to overcome the crisis. (…) Telling the French the truth means telling them that the current crisis will have consequences in the coming months for growth, unemployment and purchasing power. (…)

A certain idea of globalization is biting the dust with the end of a financial capitalism which had imposed its rationale on the whole economy and contributed to corrupting it.

The idea of the all-powerful market which wasn’t to be impeded by any rules or political intervention was a mad one.

The idea that the markets are always right was mad. (…)

It was a madness for which we’re paying the price today!

This system, where someone responsible for a disaster can leave with a golden parachute, where a trader can lose his bank €5 billion without anyone noticing, where people demand from businesses returns three or four times higher than the growth of the real economy – this system has created inequalities, demoralized the middle classes and fuelled speculation on the property, commodities and agricultural markets.

But this system – this has to be said because it’s the truth – isn’t the market economy, it isn’t capitalism.

The market economy is a regulated market, a market serving as a tool for development, serving society, serving everyone. It isn’t the law of the jungle, it doesn’t procure exorbitant profits for some and make everyone else make sacrifices. The market economy means competition, reducing prices, eliminating the huge dividends gained without effort, and benefiting consumers.

Capitalism isn’t a system for the short term, it’s for the long term, the accumulation of capital and long-term growth.

Capitalism isn’t a system giving primacy to speculators. It gives primacy to entrepreneurs, rewards labour, effort and initiative.

Capitalism isn’t a system for diluting ownership and for widespread irresponsibility. Capitalism means private ownership, individual responsibility, personal commitment, a code of ethics, morality and institutions.

Capitalism is what has allowed the extraordinary growth of Western civilization over the past seven centuries.

The financial crisis isn’t the crisis of capitalism. It’s the crisis of a system which has distanced itself from capitalism’s most fundamental values, which has betrayed the spirit of capitalism.

I want to tell the French: anti-capitalism offers no solution to the present crisis. Going back to the collectivism which in the past brought so many disasters would be a historic error.

But doing nothing, changing nothing, contenting ourselves with burdening taxpayers with all the losses and acting as if nothing had happened would also be a historic error. (…)


The current crisis must prompt us to build capitalism on a new sounder foundation, base it on an effort and work ethic, restore a balance between freedom and regulation, between collective and individual responsibility.

There must be a new balance between the State and the market when public authorities the world over are being compelled to intervene to save the banking system from collapse. A new relationship must be established between the economy and politics through the development of new regulations. (…)

I have no hesitation in saying there must be a limit on the remuneration of executives and dealers. There have been too many excesses, too many scandals. So either the financial industry agrees on acceptable practices or we will settle the problem through legislation before the year is out.

Executives must not have the status of managing agents and at the same time enjoy the guarantees linked to a labour contract. They must not receive free shares. Their remuneration must be indexed to the business’s actual economic performance. They must not be able to claim a golden parachute when they have committed errors or caused their businesses huge problems. And if the executives have a stake in the company’s performance, the other employees must too. If they have stock options, the other employees must also have them or, failing that, benefit from a profit-sharing system.

Those are some simple principles based on common sense and elementary ethics – and they are something I’m not going to back down on.

Executives get high pay because they bear heavy responsibilities. But you can’t want to be very well paid and not want to shoulder your responsibilities. (…)

We have to find out where the blame lies and those responsible for this collapse must at least pay some financial penalty.

Secondly, we must regulate the banks to regulate the system. Since the banks are at the heart of the system. (…)

The crisis should lead to a large-scale restructuring of the whole global banking sector. Given what has just happened and the importance of the stakes for the future of our economy, it goes without saying that in France the State will play an active role.

We are going to have to tackle the problem of the complexity of savings products and transaction opacity so that everyone can make a real assessment of the risks they take.

But we’ll also have to give thought to the issues which cause anger such as tax havens, the circumstances in which dealers can engage in short selling, allowing them to speculate by selling shares they haven’t got, and all-day trading, allowing them to buy and sell shares at any time – and we know the role these play in markets spiralling out of control and speculative bubbles.

We’ll have to ponder the obligation to value assets at market prices which prove so destabilizing in a crisis.

Finally, we are going to have to decide to supervise the rating agencies which are failing in their job. (...)

But we wouldn’t completely sort out the financial system if at the same time we didn’t seek to end the currency disorder.

Exchange rates are at the heart of the financial crisis just as they are at the heart of the distortions affecting global trade. And if we don’t take care, monetary dumping will end up generating extremely violent trade wars, so paving the way for the worst protectionism. Since a French manufacturer can make all the productivity gains in the world, at a pinch he can compete with the Chinese workers’ low wages, but he can’t compensate for the undervaluing of the Chinese currency. (…)

So I repeat just how necessary I think it is for heads of State and government of the main countries concerned to meet before the end of the year to learn the lessons of the financial crisis and coordinate their efforts to restore confidence. (…)

I am convinced that the sickness runs deep and that there has to be a root and branch revision of the whole global financial and monetary system, as was done at Bretton Woods after the Second World War, in order to create the tools for global regulation, now made necessary by the globalization of trade. We can’t go on managing the economy of the twenty-first century with the instruments of the twentieth, no more than we can design tomorrow’s world with yesterday’s ideas.

When every day the central banks are making cash injections into banks and American taxpayers are on the point of spending a trillion dollars to prevent widescale bankruptcy, it seems to me that we need no longer question the legitimacy of public authority intervention in the operation of the financial system! (…)

In these exceptional circumstances when everyone absolutely has to act, I call on Europe to ponder its ability to cope with the emergency, to rethink its rules, its principles, learning the lessons of what is happening in the world. It must give itself the means to act when the situation demands and not condemn itself to inaction.

If Europe wants to safeguard its interests.

If it wants to have a say in reorganizing the global economy.

If it wants to give itself the means to emerge strengthened and not weakened from the present crisis, its leaders must start thinking together about its competition doctrine which, to my mind, is only a means and not an end in itself, about its ability to mobilize resources and prepare the future, about the economic policy instruments and objectives assigned to monetary policy. I know it’s difficult because there are 27 countries in the EU, but when the world changes, Europe has to change too. It has to be capable of drastically changing its own dogmas. (…) As EU President, I shall propose initiatives along these lines at the next European Council.


As regards our country, I tell the French who fear for their savings deposited in banks and financial establishments: French banks seem to be in a position to overcome the current difficulties, but if speculation were to put them in a difficult situation, I wouldn’t accept a single depositor losing a single euro because a financial establishment proved unable to meet its commitments. Savers who have trusted our banks, companies, our country’s financial institutions won’t see their trust betrayed. They won’t pay for the errors of the executives and imprudence of the shareholders.

I make a solemn promise this evening: whatever happens, the State will guarantee the security and continuity of the French banking and financial system.

Equally determinedly I say: if the present difficulties were to lead to a restriction of credit depriving the French and businesses, particularly SMEs, of the resources to finance their investments or ensure their cash flows, the State would intervene to underwrite this funding. It would do so through bonds, through guarantees, through capital injections or by amending banking rules, but it would do so to prevent the economy fatally spiralling into a long-term recession. (…)


Because of the crisis, the pace of reform must be speeded up, not slowed down.

I want to tell the French that there is no miracle solution allowing our country to dispense with the necessary efforts to overcome the crisis.

Of course, we must start by thinking about the most vulnerable whose lives are becoming too hard and who are suffering. It’s in these times of crisis that we have to show the greatest solidarity with those in difficulty. This is why I took the decision to create the RSA [1], the minimum vieillesse [2] and the most modest reversionary pensions (…).

When you want to tell the French the truth, you have to tell them the whole truth, and the truth is that the State can’t go on forever financing its current spending and spending on solidarity by borrowing. One day we have to pay our debts. (…)

To restore some room for manoeuvre in order to prepare the future, the State’s operating expenditure has to fall. Next year the civil service will shed an unprecedented total of 30,600 jobs. We will go on implementing the reforms resulting from the general review of public policies. (…)

After the radical revision of the "judicial map" [location and jurisdiction of French courts] and restructuring of the military bases, we have to go further in the reorganization of our government departments and public services. Next year, we are going to start phase two of this reform.

We’ll start work on the major reform of our local authorities in January. The time has come to think about our local government levels – the number of them and their overlapping responsibilities is a source of inefficiency and additional expense. Our economy absolutely must be competitive. It can’t bear an excessive public expenditure burden.

But in the current economic situation I won’t pursue a policy of austerity which would exacerbate the recession. I won’t accept rises in tax or social security contributions which would reduce the purchasing power of the French. My goal is to give the French back purchasing power, not reduce it.

I won’t agree to increasing charges on businesses because that would weaken their competitiveness when, on the contrary, it should be strengthened. (…)

France will pull through not by working less but by working more. (…)

With the reform of the 35-hour week, removal of tax from overtime pay, by keeping tax exemptions on low wages, bringing in the RSA and the forthcoming boost to statutory and voluntary profit sharing, we are pursuing the same goal: to reduce business labour costs, make work pay and free up the labour market. (…)

The forthcoming Act on statutory and voluntary profit sharing is wholly consistent with this goal of restoring the balance between capital and labour. Not giving all the benefits to company directors and shareholders, but instead giving a greater share to those whose labour is instrumental in creating the wealth, restoring employees’ purchasing power without increasing their companies’ fixed costs – this, alongside the RSA is the other revolution we have to embark on.

Need I add that in the present global economic situation, anything which could contribute to increasing labour costs would be suicidal. (…)

The other face of capitalism needing a boost in value is the entrepreneur. On one side there is financial capitalism and on the other entrepreneurial capitalism. Alongside the labour value, we have to put the spirit of enterprise back at the heart of the economy’s value system. That’s the whole philosophy behind the Act on modernizing the economy and this will be the other priority of economic policy in the future.

Supporting the worker’s efforts, as opposed to the speculator’s easy money, supporting the personal commitment of the entrepreneur, who risks everything in his/her businesses, as opposed to the anonymity of the financial markets, supporting a production capitalism as opposed to a short-term capitalism, and according priority to industry just when the financial noose is loosening, that’s the whole purpose of the economic policy I want to pursue.


Telling the French the truth means telling them we are moving from a world of abundance to a world of scarcity. I.e. moving from a world in which natural resources are used as if they were inexhaustable to a world where their impending exhaustion will be a matter of daily concern. (…)

The French will have to produce in another way, consume differently. They will have to learn to keep on striving to economize the rare resources which can no longer be wasted.

Pollution and global warming threaten the planet’s future. Everyone is going to have to make efforts, change their behaviour, pollute less. (…)

In tomorrow’s world, the polluter-pays principle will have to apply everywhere if we don’t want to bequeath to future generations a world in which life is impossible.

While there’s a need to tax investment less, tax labour less, penalize effort and success less and tax clean products less, we must, on the other hand, tax pollution more.

Using the tax system to address the environmental challenge is essential if we want to encourage a radical change in behaviour.

While in the present situation where so many French face a reduction in their purchasing power we have to rule out increasing the cost of staples, I want to say how much I believe that the “bonus-malus” system [3] is a good one. The experience with cars has been particulary conclusive, with 500,000 "bonuses" paid out in eight months, massively increasing the demand for more environmentally-friendly vehicles. The extremely strong incentives in the "bonus malus" system which speeds up the process of changing consumption patterns by years will be extended to other products. There will be full consultation on this. It will be done gradually. But it will be done. It’s a promise. Just as I solemnly promise that all the conclusions of the Grenelle Environnement the “Grenelle Environnement” is a conference bringing together the government, local authorities, trade unions, business and voluntary sectors to draw up a plan of action of concrete measures to tackle the environmental issue. will be implemented. (…)

I believe in sustainable growth. (…)

Implementing the Grenelle Environnement means a fourfold increase in the number of dedicated lanes for public transport vehicles [such as buses and trams] building 2,000 more kilometres of high-speed rail track, the "autoroutes ferroviaires" [lorry-rail schemes], marine motorways [direct scheduled links between two ports provided by permanent rotations of fast boats on which lorries can be embarked], a billion euro on research into sustainable development between now and 2012 and renovating all social housing and public buildings to make them energy efficient. (…)

We are going to develop massively the research programmes into the new energy sources, clean technologies and new transport systems such as the electric car. Replacement of our nuclear power stations by new generation power stations will be speeded up. Everything will be done to get the public transport infrastructure programme under way as fast as possible. I want to see work begin on looking into a major project to modernize public transport infrastructures in our major towns and cities where the situation has often become critical. (…)


Telling the French the truth means telling them that if we are to join the knowledge economy, the twenty-first century economy, we can’t delay investing in training, research and innovation. We can no longer delay achievement of the digital revolution. (…)

This is why I wanted our universities to be independent, and part of the capital of EDF has been sold to fund the modernization of our campuses. This is also why we are allowing universities to own the intellectual property rights for their discoveries and giving them the resources to capitalize on them.

This is why the rate of the crédit d’impot recherche [4] has been raised to 30% [of investment on R&D], our research system is going to be reformed and a national strategy for research defined.

* * *

All these challenges are immense.

But our country can meet them. I’ve confidence in the French. I’ve confidence in France’s strengths. I’m certain our reforms will work. I’m certain that through our efforts we’ll be able to take our due place in the world of the twenty-first century. I’ve confidence in our ability to build capitalism on a new sounder basis.

Never since 1958 have so many changes been made in such a short space of time. When the global economic situation improves again we’ll see all the fruits of these efforts in the stability of our finances, jobs, purchasing power and everyone’s well-being.

I’m determined to go on modernizing our economy and society whatever the difficulties because we no longer have any choice but to do so, because we can’t wait.

At a time when old ideas and old structures are being swept away, we must be imaginative and bold.

We can choose to sit on our hands or take the lead. My choice is made.

Frenchwomen, Frenchmen, in the midst of these difficulties we must be ahead of the pack, not following behind. (…)./.

[1revenu de solidarité active – inclusion income support comparable to the US EITC (earned income tax credit) and British WFTC (working families’ tax credit), providing additional income support for anyone on minimum social benefits who starts a job, or new job.

[2minimum level of income required to live.

[3a financial reward (bonus) for purchasers of environmentally-friendly new cars and a financial penalty (malus) for those buying cars emitting high levels of CO2. The aim of the scheme is to speed up the removal from French roads of old polluting vehicles and their replacement by new green ones and encourage vehicle manufacturers to develop ever greener vehicles and concentrate their sales efforts on these.

[4R&D tax credit designed to increase firms’ competitiveness by bolstering their R&D effort.

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