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International economic situation

International economic situation

Published on March 30, 2009
International economic situation – Speech by Nicolas Sarkozy, President of the Republic (excerpts)

Saint-Quentin, March 24 2009

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(…) We are living through a crisis whose end no one can predict, whose consequences no one can foresee. Nor can anyone imagine the degree to which it’s going to change the world, and in this period of great uncertainty we must ensure more than ever before that we don’t lose our reference points. If we lose our reference points we will become puppets at the mercy of events instead of pulling the strings ourselves.

This economic crisis, this social crisis is also an intellectual and ethical crisis. We won’t emerge from the crisis if we evade the questions of principles and values.

This evening I want to set out our values.

I want to restate some reference points.

These reference points, these values are those of an ethical capitalism, a genuine and not virtual republic vis-à-vis its principles, and of an irreproachable democracy. Our values are respect, responsibility, justice and freedom.

My duty is to respect the French. And the first criterion for respect is to tell the truth. I have done so since the beginning of the crisis. I want to tell them that it will be tough but that we’re going to get through it, that we have to stay united and we have to understand that in this crisis, the suffering caused by this crisis affects us all. I mean "all of us".

No one can hope to get through it on their own.

In times of trouble, obviously people instinctively put up the shutters, consider only their own difficulties, or even their own interests, regardless of how legitimate they may be. This temptation for a country or an individual is suicidal. (…)

In such a deep, serious crisis, regardless of their place in society, everyone has a moral responsibility. (…)

So everyone has to think about the consequences of what he or she says and does.

Everyone must endeavour not to yield to demagogy, since demagogy always creates populism.

And everyone has to ask themselves the whole time – and believe me I ask myself this every moment – whether what they are deciding is fair since, because of the sacrifices it imposes, the crisis makes unfairness in our country even more intolerable. (…)


I am conscious of my duties in exceptional circumstances: of all the duties, my first is to act. So many have the duty to talk, there has to be someone with the duty to act. I have the duty to ensure fairness and of course I have the duty to bring people together, but I want to put my cards on the table right away. In the face of the crisis, inertia is death. (…)

I want to tell the French: what would have happened if last autumn the States hadn’t intervened when the whole world’s banks could no longer recapitalize, when the whole world’s banks no longer lent each other money because they no longer had confidence in each other?

What would have happened had the States – and France in the vanguard – not taken strong action? What would have happened after the collapse of the Lehman Brothers bank on 18 September if another major bank had gone under and, for fear of losing their savings, savers had gone to withdraw them? We weren’t far from that situation last autumn.

France was the first to say that she wouldn’t let a single one of her banks collapse – and I had added: not a single saver lose a euro centime. France has kept her word. No bank has gone under, not one of you has been to the bank and been unable to withdraw your savings. And, unlike other countries, there’s been only one bank rescue plan. There has been only one because it was the right one. And because the French bank rescue plan was the right one, Europe – the whole of Europe – has adopted its principles.


France – in November – proposed bringing the Heads of State and government of the world’s 20 largest powers together in Washington to discuss the global stimulus, making financial capitalism more ethical, involving the major emerging countries which until now have been excluded from all the decisions.

France was right, since the Washington meeting took place and London will be in a week’s time. France is always right when she refuses to give up.

We acted to get Europe moving.

We acted to get the world moving.

We acted for ourselves.

We have recapitalized the banks.

We have provided them with equity so they can continue doing their job.

This money wasn’t given. This money was lent. This money has brought in interest. On television I told taxpayers that these loans to banks wouldn’t cost them a centime – and although the argument about the money the State lent the banks may seem derisory and in a way a bit contemptible, today we’ve got the results: €1.4 billion will go back into the public purse and be used to help the poorest households. I had promised this. I said this. We’ve done it. (…)

Just imagine for a moment what would have happened if, losing our cool, I had listened to those getting restless and asking us to nationalize all the banks. Do you really believe that the State should do the bankers’ job in their place? And today, what would we be saying, what would we be doing? Loss of reference points, restatement of values: in a crisis, we must first of all keep our cool.


We have created the job of credit mediator. In four months the credit mediator, René Ricol, has done a remarkable job. He has come to the rescue of 3,000 businesses. That doesn’t make the headlines; it isn’t very spectacular, but it’s effective.


We have rescued businesses. This is the goal of the strategic investment fund, which is a French-style sovereign fund. I still remember the argument; sovereign funds were popular everywhere in the world except in France. We set up this sovereign fund and through it the State can now make equity capital injections, make our businesses safe from predators attracted by the possibility of buying them at a very low price because of the collapse of the Stock Exchanges and share values.

I have asked for the strategic investment fund to be ready to invest €10 million in Heuliez provided it had an industrial project – since I won’t use taxpayers’ money if there’s no industrial project – and provided it found partners and the owner was ready to dig into his own pocket. After all, that’s the least you can require when you are going to the taxpayer for money.


We have supported our businesses: this is the goal of the €26 billion stimulus plan decided on last December.

We have saved thousands of jobs by stimulating investment, I’ll come back to this. We have saved thousands more by coming to the rescue of our car manufacturers threatened with bankruptcy by the collapse of demand and scarcity of credit. And I held out against the accusation of protectionism, because had France let Renault and PSA go under, then our partners who have Renault and PSA plants elsewhere in Europe would have been the first to have been penalized. Really, people aren’t going to criticize us for rescuing groups which have created jobs throughout Europe, that would be the last straw!


By doing all this we wanted to protect France – but the whole of France is exposed to the crisis –, this includes the France who is working despite the anxiety, the France who doesn’t protest at a time when she is subjected to huge pressures. I want to tell you that it isn’t because people don’t protest that they won’t be heard by a democratic and Republican government.

Of course, I have the duty to hear those who demonstrate, but I’ve also got responsibility for those who don’t march and the fact that they aren’t marching doesn’t mean they aren’t suffering. (…)


We have taken measures to compensate for partial unemployment, because it’s better temporarily to be working part-time than have no job at all. From now on, someone on the minimum wage compelled to go part-time will receive virtually the whole of his/her full net wage. This is especially important because employees forced to go part-time are in no way to blame and there’s no reason for them to suffer financially for the consequences of decisions for which they are in no way to blame.


We have extended the "contrat de transition professionnelle" [1] to 25 labour market areas [UK equivalent: TTWAs] in difficulty [factory closures, unemployment, etc.] and we’ll do more (…) because this contract allows redundant workers to retain their full net wage for a year and have support in finding another job. Here too, I am talking about those made redundant for economic reasons. It’s not their fault at all, we have no right to abandon them.


We have created a €3 billion social intervention fund.
We have created the RSA [2], which nearly 4 million families will be receiving from July.

By 1 April 2009, 240,000 people will have lost their jobs and won’t be entitled to unemployment benefit, mostly young people because they haven’t paid enough contributions. Obviously, we can’t criticize young people for losing their jobs for economic reasons and tell them "you’re not entitled to unemployment benefit, you haven’t contributed". [The reply will be:] "Of course I’m young so I haven’t had time!" They will get a special payment of €500.

In April 2009, 4 million low-income households will get an exceptional allocation of €200 pending the commencement of the RSA, because I wanted an end to the RMI [form of income support] which was nothing but a trap leading to permanent unemployment and offered no possibility of getting out of it.

In 2009, the disabled adults’ benefit will go up a total of 4.4% in two stages, in April and September. During the presidential campaign I had pledged that over the five-year mandate, this benefit for disabled adults, who have perhaps a greater need than others for solidarity, would be raised by 25%. I shall honour this promise since it would be scandalous that in the crisis those of our compatriots who have a disability for which they bear no blame should suffer even more. (…)

Again in April 2009 (…) 400,000 disadvantaged pensioners living alone will see a 6.9% rise in the minimum vieillesse [minimum income for pensioners] and, moreover, over the five-year term we shall raise it by 25%, because, crisis or no crisis, when you’ve worked all your life and paid contributions, society owes you a decent minimum income. That’s how I see human dignity in our country.

The final two [out of three] instalments of income tax paid on 2008 income will be abolished or reduced for 6 million families in or just above the lowest tax bracket. (…)

In June, an exceptional allowance of €150 will be paid to 3 million low-income families with children over the age of 6 attending school, because life for them is expensive.

From mid-June this year, €200 coupons for carers, cleaners, educational support, child minding will be given to 1.5 million families; this will create jobs. It’s a form of benefit in kind.

All in all, with the RSA, €3.5 billion of new resources will support the income of those in greatest need of it, taking the total State effort to nearly €30 billion (…).

But these measures aren’t handouts, since handouts aren’t the solution. These measures are justice for those suffering the most and who aren’t those protesting the most. (…)

We had to act. We have acted. It was my duty. Is it enough? If the situation were to deteriorate, we’d do more. But I beseech you: wisdom, common sense and the need to stay cool dictate that we wait for everything which has been decided to be implemented, that we allow time for all these measure to produce their effects. I shall propose to the social partners that we assess the first results. We will do this before the summer in the light of the economic and social situation and will, if it’s necessary, think about other measures. (…)

Already, I am certain it’s going to be necessary to do more in three areas.


We shall need to go further in the area of our infrastructure. (…) I’m thinking particularly of the development of the major transport infrastructures for which we have decided on a plan of unprecedented scale. The crisis is going to give us the opportunity to end an intolerable system where a minimum of 25 years were needed between the taking of a decision and the entry into service of a new railway line. (…) The transport system is saturated: every day it makes life hellish for millions of Ile-de-France inhabitants. At the end of April we shall take decisions commensurate with the challenge of improving the daily lives of 12 million French.


I think we must also do more on a very difficult issue (…): industrial restructuring. (…) the State can’t rescue every business, but every employee of a business which has had to shut down has the right – and I mean the right – to a solution tailored to his/her circumstances, to a new job, or training to get a new job and an income. (…)

So we are going to appoint "reindustrialization commissioners" in every labour area suffering unemployment. (…) I want "reindustrialization commissioners" with the means to bring together all the State’s resources to assist in reindustrializing the areas. (…) I want France to remain an industrial nation. I want her to keep factories – and I know that at times people mock me because I’m always going into factories, but I think that a great nation has to be able to manufacture cars, ships, planes and trains. There’s a French industrial tradition and if we allow it to go elsewhere we’ll never get it back, and when the factories and industry have gone, the services will follow and there will no longer be anything. (…) I am facing up to my responsibilities of course and this is why I say that we can no longer tax production as we’re doing today.


In a free world, if we go on taxing production we’ll have less and less production and if there’s no more production on French soil where will your children find jobs? (…) I am proposing to abolish the taxe professionnelle [a business tax] which exists nowhere else in Europe. (…) With this system we’ve reduced car production in France: in 2004, we were producing 3,200,000 vehicles in France, in 2007 we produced only 2,100,000. There’s no point shedding crocodile tears, the taxe professionnelle adds €250 to every car produced in France. This system has to end because it’s leading to the ruin of French industry. (…)


Let me add that I would see only benefits in a carbon tax allowing imports to help fund our social protection. I speak my mind. There are countries which don’t comply with any of the environmental rules we impose on our firms. Well, those countries will pay through the carbon tax we’ll be introducing – a tax which is perfectly normal. There’s no reason for us to accept on top of social dumping, monetary dumping and fiscal dumping an environmental dumpting which will end with us leading the world to ruin.


(…) We can see the first results of this desire to save our industry and I want to congratulate the Renault management for repatriating the manufacture of the Clios to Flins; the Flins jobs will benefit first the Sandouville workers, I had promised them this. It’s very good news. France doesn’t want all the car industry jobs, but France doesn’t consider it abnormal for plants and industrial jobs to be created on her territory.

Otherwise what would be the point of two of the world’s ten largest car manufacturers being French.


I think too that more must be done for young people.

Because young people arriving on the job market in the middle of a crisis are going to be the most affected.

Before the middle of April, we will have an emergency plan to help young people.

I attach great importance to sandwich courses, apprenticeships and sending our young people into industries where there are jobs for tomorrow and not to those where there aren’t any jobs, or rather no longer any jobs and failing businesses. It’s quite something for us to be able to say: we’ve got 600,000 young people in sandwich courses and we’re going to do more. We have to aim to double this. (…)


We have to take advantage of the crisis to speed up the structural changes. (…) For 25 years we’ve been increasing our operating expenditure and reducing our ability to invest. I wanted a complete change of strategy: for us to increase our ability to invest and reduce the proportion of our resources going on operating expenditure. This is why I won’t back down, because it isn’t in France’s interest for me to do so. I won’t go back on my commitment to replace only one of every two civil servants on their retirement. France does not have the resources for me to do so.


Of course we shall consult on these reforms, engage in dialogue, but we will carry them out. I want to make things clear, I won’t be the President of the Republic who raises taxes, I wasn’t elected for that. (…) You don’t reduce unfairness by increasing taxes, you don’t create jobs by increasing taxes. We are in an open world, in a world where jobs and capital move around. Increase taxes and you can be certain that jobs and capital will turn away from the French economy, so it’s the opposite of what needs to be done in our country. (…)

I appeal to your common sense. Not taking through direct taxation more than 50% of a household income is a principle of freedom. I am committed to the word and the reality of freedom. It’s a principle which in Germany is written in the Constitution. (…) This limit to total tax-take is the guarantee that investors who invest in France won’t be plundered on the tax front, but I’m going to go further. The limit on total tax-take is the expression of a choice by society which lends positive value to success. (…)

I have given myself the goal of restoring France’s competitiveness, it’s my duty. We have eliminated the handicap of the 35-hour week thanks to tax-free overtime, we have reduced the handicap of the compulsory contributions with the limit on total tax-take, [we have extended] the crédit impôt recheche [R&D tax credit] and abolished the tax on most of the legacies paid by French families who had worked all their lives, paid taxes all their lives and are perfectly entitled to hand down to their children the product of a life’s work. As for the problems caused by strikes, we have reduced them with the minimum service obligation. (…)


France is going to lead the battle to make financial capitalism more ethical and bring in a new, better regulated capitalism.

We can’t change everything all at once, but we need results, because you are expecting results.

I say in advance I won’t go along with a global summit which decided to decide nothing, because I believe time is no longer on our side. We have to restore confidence and confidence won’t come back without new rules which will end the excesses of the past 25 years. If we don’t want to play into the hands of the anti-capitalists, then capitalism has to stop caricaturing itself. The London summit mustn’t be a summit for technical discussion, but a political summit where the crucial question will be whether we reform capitalism or leave the field free to those who want to destroy it and, in doing so – let’s make no mistake about this – will destroy freedom.

We know where anti-capitalism leads. We don’t want to recreate the conditions of the tragedies of the past. So let’s not wait any longer, let’s put an end to the excesses and abuses.


Of course, the first freedom is to have the possibility of allowing your family to climb the social ladder thanks to your work.

I mean that it’s legitmate for those who create wealth, jobs and businesses to earn money. I even wish them lots of money. We mustn’t discourage the desire to start up a business. It’s been a driving factor since mankind began. We mustn’t penalize success. We must not kill the taste for risk. Egalitarianism is the opposite of justice. Egalitarianism is levelling down. An egalitarian society is the opposite of a society of freedom and responsibility.

I shall oppose all forms of egalitarianism because they aren’t values I believe in, just as I oppose handouts, (…) because the remedy is worse than the evil.


But the ethics of capitalism have to be those of responsibility, effort and honesty.

I speak my mind: getting a big payout in the event of failure isn’t responsible or honest.

Handing out bonuses in a company which is implementing a social plan or receiving State aid isn’t responsible or honest.

For a boss who has put his/her company in a difficult position to be able to leave with a golden parachute isn’t responsible or honest. (…)

It isn’t honest to use public funds for anything other than to bring about a company’s recovery and it isn’t honest to use even a small proportion of them to pay people who don’t deserve it. (…)


On the other hand, when the bosses of a company in difficulty as a result of the crisis and not receiving public aid decide to distribute free shares to all the employees and not just to the executives, they are doing the most intelligent thing. You don’t build a firm’s success without keeping its employees onside. You don’t confront the problems without them. You don’t emerge from a crisis like this one without motivating them, mobilizing them, giving them hope, consideration and respect.

This is clearly the spirit of the Act of 3 December 2008 under which you can’t distribute stock options to executives and not enable all the employees to share in the businesses’ success. (…) I get the feeling that I haven’t been fully understood, so I’m going to make things clear.

When a business makes losses, no one can compel it to distribute money it hasn’t earned. When a company makes profits of hundreds of millions, billions of euros, it isn’t acceptable not to discuss publicly the sharing of the value and profits. Because employees, even the most recent recruits, have contributed to creating this wealth. (…) I have asked both sides of industry to tackle this issue. (…) If no significant progress on profit sharing is achieved by June, then I shall face up to my responsibilities. And in the autumn, the government will present a bill. (…) I won’t accept a refusal to discuss profit sharing in a country of 65 million inhabitants, the world’s fifth-largest economy. I’m not saying you have to have the same rule for everyone, but I’m saying that you can’t say: we have to keep wages low for reasons of competitiveness, keep bonuses high for reasons of motivation and when success comes not agree to talk about sharing profits between the shareholders and employees and investment for the future. This debate will take place and the results will be delivered.


(…) If France is active, if she is present, she has a chance to play her full role. If we’re not active, if we’re not present, if we grumble, complain, do nothing, no one will wait for us. It’s only us who can devise a new growth model which better fulfils our ambitions and is based on sustainable development.

This crisis is painful. But it also gives us a tremendous challenge to take up. At this moment in our history, nothing would be more tragic than a victory for maintaining the status quo in every area so that nothing changes.

Every morning I’m told, “it isn’t possible.” Every lunchtime I’m told, “it’s impossible”. And every evening, I’m told, “it’s impossible.” And often for good reasons. Every day I say, “we’ll do it anyway.” Because we haven’t got a choice. If I have to agree to maintaining the conservatism and inertia which for so many years have hindered our country, well, who will prepare France’s future? The future of the French, your children’s future? Basically the choice is clear. Either we lead the process or we passively endure things. Either we come last, or first. Either we give up or we go for it. But if we go for it, we must really go for it, leaving behind the old divisions of right, centre and left. No: demand, consumption and supply, Keynesian economics, Milton Friedman and all the others, and their references, that’s the past. We’ve got to move forward. We’ve got to confront this challenge.

I don’t know when the crisis will end, I don’t know when we’ll have redeemed ourselves for the follies of those years when no one was paying either the real price for risk, or the real price for scarce resources.

But I know that one day this crisis will end. The only valid question: where will we be then? What will we have done to prepare ourselves for it? My ambition, when the crisis is over and the recovery comes, is for France to be ready. Ready for the future, not for the previous war, as we’ve so often done in our history and for which your region has paid such a heavy price.

We’ve got to fight the consequences of the crisis on a daily basis, not leave anyone by the wayside. And at the same time, prepare for the future, invest and reform. (…)./.

Translation by

[1the French contrat de transition professionnelle (CTP) is offered to workers who face redundancy due to economic reasons and for whom the employer does not have a legal duty to contribute to their re-employment.

[2RSA: revenu de solidarité active – inclusion income support comparable to the US EITC (earned income tax credit) and British WFTC (working families’ tax credit).

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