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Euro Area crisis

Published on August 23, 2011
Interview given by Jean Leonetti, Minister responsible for European Affairs, to “RTL” (excerpts)

Paris, August 22, 2011


Q. – You’re the Minister responsible for European Affairs; like us, you’re aware of the collapse of European stock markets and the increasing concern about banks, including French banks – all those institutions weakened by the states’ debt.

Are you afraid the collapse of the financial markets will continue this week?

THE MINISTER – You know, the financial markets are geared to the short term, to short-term profitability. They’re feverish and sometimes react to situations in an exaggerated way. Moreover, you saw the excessive reaction to the downgrading of the USA’s rating. In the face of this irrational situation, politicians must provide rationality, clear-sightedness and stability. So I’m delighted that President Sarkozy and Angela Merkel took an initiative on key priorities signalling stability in the Euro Area, which is rather a stable area, by the way.

Q. – That position can’t be said to have won over the financial operators, who are more worried about the long term, because they say that in 10 years’ time they risk not recovering the money lent today.

THE MINISTER – They react a lot in the short term, but we must actually build a long term. When Nicolas Sarkozy and Angela Merkel say at the same time, “we’ll establish tax harmonization, apply the golden rule to the 17 Euro Area countries and lay the foundations for a European economic government”, they’re really thinking about the long term. Europe generally evolves through crises, and this time we have an unexpected chance to make Europe evolve towards more economic integration.

Q. – But – again, like us – you saw the failure of last Tuesday’s summit. People haven’t understood, for example, what an economic government is. What is it?

THE MINISTER – It’s not necessarily just appointing an economy minister for Europe. The French have clearly understood one thing: we have a single currency, so how can we have a single currency and different economic and fiscal policies?

Q. – So who’s going to decide for everyone? An economic government, presumably?

THE MINISTER – Europe always operates in more or less the same way; in other words, there’s a Franco-German initiative; why Franco-German? On the one hand because it’s the tradition, and on the other because France and Germany represent 50% of the Euro Area’s gross domestic product. We then try to persuade all the other partners, and in the end we get there: we get a result.

Just now you were mentioning Jacques Delors, who was talking about the abyss threatening the euro. Let me remind you that the euro is a strong currency and that the Euro Area’s aggregate deficit is barely 4.5% of GDP, whereas it’s 10% in the United States and Japan.

Q. – “Open your eyes,” said Jacques Delors. Aren’t you refusing to open them this morning?

THE MINISTER – Opening your eyes means laying the foundations for a new Europe. We’ve seen a naïve Europe, a Europe that was enlarging and bringing into the Euro Area people who perhaps weren’t totally ready for that Euro Area. Now we’re moving on to a realistic Europe with rights and responsibilities, avowedly supportive – Europe showed it with Greece – but disciplined at the same time.

Q. – But you haven’t answered my question: are you still afraid of a collapse of the financial markets this week, or do you think confidence will return?

THE MINISTER – I think confidence will gradually return. The fact that in September and October it’s going to be possible to implement the decisions proposed by Nicolas Sarkozy and Angela Merkel is a factor that will provide reassurance in the medium and long term.

Q. – According to Frédéric Oudéa, Société Générale’s chairman and managing director, Société Générale is currently having a hard time: the markets are waiting for political decisions, but those are being delayed! It’s your fault.

THE MINISTER – No. I think the markets are waiting for political decisions and they were proposed during the summer period. The markets would like us to pool the debt and then be able happily to swap their Portuguese bonds for European bonds. But the interest of the markets isn’t the interest of states, and it’s not the general interest. For once, politics is getting back onto solid, concrete, long-term ground. (…)./.

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