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International financial situation

International financial situation

Published on October 6, 2008
Letter from M. Nicolas Sarkozy, President of the Republic, to Mr José Manuel Barroso, President of the European Commission.

Paris, October 3 2008.

President Barroso,

A grave crisis of confidence is rocking the global economy and financial activity.

Europe cannot but be affected by its consequences, despite the high calibre of the management of its financial institutions.

Growth has markedly slowed down, European businesses, particularly SMEs, are confronted with growing financing problems at a time when they are the leading creators of jobs and drivers of innovation in Europe.

Against this background, over the past few days, several Member States have, as a matter of urgency, had to take measures to safeguard their national banking systems, thereby displaying their determination to safeguard long-term the financing of the economy and ensure security for savers.

Going beyond these measures and informal consultations, it is unequivocally in Europe’s interest for there to be an intense effort to coordinate and align the measures to be taken. Our citizens expect us to take resolute action to protect them.

We shall be meeting in less than two weeks’ time, in Brussels, at the European Council, to decide together on the principles of our joint action. I think it essential for us also to decide then on concrete measures capable of encouraging the return of confidence.

In order to prepare our discussions in the most productive way possible, I should like our finance ministers, who will be meeting at the ECOFIN Council on 7 October, to frame an overall economic policy strategy allowing us to address the present situation.
I should like this to contain inter alia:

- a shared diagnosis and agreement on the economic policy measures most capable of encouraging a rapid return of growth and contained inflation in order to support Europeans’ purchasing power. I should also like proposals enabling us to avoid any undue tightening of the financing of both households and our businesses, particularly the smallest ones;

- proposals on the methods of remedying the malfunctions observed: this means improving transparency and making all the financial players take responsibility for their actions; it also means taking greater account of actual business performance when setting executive remuneration and establishing mechanisms preventing excessive risk-taking in the financial sector;

- methods of strengthening the European system of supervision.

We shall also have to agree amongst ourselves on the principles capable of ensuring, in the interventions we might possibly still have to make vis-à-vis the financial sector, respect for the EU’s legal framework and the absence of any undesirable impact on our partners of individual country’s decisions.

This emergency situation calls for unity and a will to cooperate on action. This will be the main challenge of our forthcoming meeting. I shall send you the presidency’s proposals for the organization of your discussions as soon as possible.

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