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Economic and financial crisis

Published on December 6, 2011
Excerpts from the speech by Nicolas Sarkozy, President of the Republic

Toulon, December 1, 2011

Members of Parliament,
Mr Mayor of Toulon, cher Hubert,
My dear fellow citizens,


Three years ago, on 25 September 2008, at the worst moment of the financial storm that was to plunge the global economy into the greatest crisis since the Second World War, I spoke to the French people from this very same hall.

I did not listen to those who advised me to say nothing for fear of creating panic by speaking the truth. It was my firm belief that, on the contrary, in order to preserve confidence, to avoid fear, it was necessary to tell the French people the truth.

And the French people were ready to hear that truth.

Telling them the truth meant telling them that France could not be immune to a global crisis.

It meant telling them that this crisis was grave, that it was going to last, that it would have consequences for growth, for unemployment, for purchasing power.

Telling them the truth meant telling them that the banking system was under threat, that their savings deposited in those banks were under threat but that we would allow no bank to go under, that we would not allow a single French man or woman to lose a single cent of his or her deposits.

Not a single bank closed down, not a single cent of any deposit was lost thanks to the plan to rescue the banks and the guarantees provided by government.

It was not the bankers who were helped.

It was not the banks’ shareholders who were protected.

It was French people’s savings that were rescued, along with their jobs, because the collapse of one bank would have led to that of all the others, and the whole economy, deprived of credit, would have collapsed.

And it didn’t cost the taxpayer a single cent.

Telling French people the truth meant telling them that the state could not go on indefinitely funding current expenditure and expenditure for solidarity by borrowing, because all debts have to be paid back eventually.

Telling French people the truth meant telling them that the crisis was long-term and required long-term solutions, that it called for the pace of reform to be speeded up, not for it to be halted or slowed.

Telling French people the truth meant telling them that in order to emerge from the crisis, they had to work more, not less.

I know that the lives of many French people are harder today after three years of crisis.

I know that despite all the steps that have been taken, many French people have suffered and continue to suffer.

Everybody has had to make efforts, everybody has had to make sacrifices.

But let’s take the time to look around us at the situations in those European countries which didn’t grasp the full extent of the crisis in time, those which didn’t make the required efforts in time. They have been obliged to lower wages and pensions and make massive increases in tax.

In 2008, I said that capitalism had to be built on a new, sounder foundation. I said that finance had to be made more ethical.

The G20, which France had called for, helped to preserve confidence, which was being shaken everywhere.

One can always bemoan that the G20 did not go fast or far enough.

But if we look at where we have come from and what has been accomplished in the last three years, it is a genuine revolution that has begun: for the remuneration of traders, for tax havens, for banks, for commodities markets, nothing will ever be the same.

In September 2008, here in Toulon, at the heart of the storm, I mapped out a way forward: a capitalism of production, regulated globalization, regulated finance, sustainable development, a new role for the state in the economy and a new European and global governance.

Beyond the emergency that the government of François Fillon had to face day after day, with a courage and determination to which I pay tribute, in order to protect the French people, France’s policy has been defined resolutely for the last four years with this way forward in mind. I have never abandoned a single one of those objectives even for a day.

* * *

But today, fear is back.

The fear that destroys confidence.

The fear that paralyses consumers, that prevents investors from investing, entrepreneurs from doing business, bosses from hiring and bankers from lending.

That fear has a name: it’s the fear that France will lose control over its destiny.

The only way in which that fear can be kept at bay is to tell the truth.
The truth is that the crisis is not at an end and that there can be no political project that does not start out from a diagnosis of the crisis and its sheer scale. To deny the crisis is to close off every prospect for the future.

The so-called sovereign debt crisis, of which Europe is bearing the full brunt, is a continuation of the same crisis. It is the crisis of private-sector debt that has spilled over into a crisis of public debt. It is the same crisis, one that, after having hit the banks, is now hitting states.
That crisis is hitting every major developed country, whether they have been governed by left-wing or right-wing majorities, and whatever their policies have been in recent decades.

We need to look for the common causes that have led the world into the situation in which it finds itself today.

It is in the institution, beginning in the late 1970s, of a form of globalization that knows no rules other than those guaranteeing freedom of trade that we can find the source of our current difficulties.
In the late 1970s, rather like a returning pendulum swing, the ideology of laissez-faire triumphed to the point that the world forgot every lesson it had learned from the Great Depression of the 1930s.

Financial globalization became embedded as a way of artificially compensating for the ravages caused in the developed countries by globalization without rules.

It was necessary to enable the surpluses of some to finance the deficits of others.

It was necessary to enable increased debt to offset the unacceptable decline in the living standards of households in the developed countries.

It was necessary to fund a social model that was straining under the burden of its deficits.

It was inevitable to ensure that financial capital could seek elsewhere the profits it could no longer hope to obtain in the developed countries.
And thus there came into being a gigantic debt production machine.
The developed countries thus sought salvation down the only road left to them: flight into ever greater debt.

In some countries such as France, it was the state that took on debt. Not a single balanced budget since 1974! In other countries, in Britain or Spain for example, for many years families took on more debt. In still others, such as the United States, both families and the state became more heavily indebted at the same time.

The extravagant growth in the financial sector that spread quite incredible amounts of debt had as a consequence the financialization of the economy. It placed the economy under the exclusive domination of an approach geared to speculation and obsession with the short term. We have now seen the dramatic consequences for industry, for the environment, for inequality and for the decline in the value of work.
Once the flight into greater debt becomes impossible because the lenders no longer want to lend, because the enormous pyramid of debt, hitherto hidden by the complexity and the sophistication of global finance, becomes apparent to all as an enormous risk, a new economic cycle can begin.

The new cycle will be very different from the one that preceded it. The cycle that is now at hand will be a cycle of debt reduction that will make the economic pendulum swing back towards work and production, which the developed countries had tended to sacrifice excessively.

The move from a major cycle of increasing indebtedness to a major cycle of debt reduction will be accompanied by an adjustment that all the economic policies of the developed countries will face.

I do not believe that it would be economically accurate, or morally acceptable to attribute our current difficulties to the French people.
We are not at the end of the Trente Glorieuses [30-year post-war boom]. We are not leaving behind 30 years of prosperity whose excesses must be corrected.

We are not leaving behind 30 years in which the French people have refused to make the slightest effort to confront competition from the emerging economies.

For 30 years the French people have not consumed more than they have earned. On the contrary, they have saved. French households are among those that save the most in the world.

For 30 years, the vast majority of the French people have endured increasing stress, increasing tension, increasing fatigue. They have found it more and more difficult to look positively to the future. I am thinking particularly of the younger generation, who have encountered ever greater difficulties in entering the world of work.

This situation has been all the more difficult to live through because for the last 30 years French people have made huge efforts to be more productive. They have shown courage.

And above all, for the last 30 years, those in work and who are proportionately less and less numerous have seen their income heavily burdened by the need to provide for those, more and more numerous, who live longer, whose student years last ever longer, who are unemployed, or in distress due to the accidents of life.

Telling French people the truth means telling them that this situation, which is unsustainable over time, has been so suddenly and drastically worsened by the crisis that we can no longer go on as we were.

It is for that reason that pension reform could no longer be put off and had to be accelerated. To deny this reality is to tell French people a serious lie. The reform we have put into effect that guarantees the funding of French people’s pensions for the future was a socially just decision. To allow people to enter unfunded retirement at 60 was a decision that was socially unjust.

Telling French people the truth means hiding from them none of the consequences of the crisis and the efforts it must entail for everyone.
If French people feel anxious when they wonder about their future and that of their children it is because they have the feeling that their lives are prey to crises for which they are not responsible, that they are no longer masters of their future.

To give French people back control over their future, France’s mastery over its destiny must be restored. And for that it is necessary to stride forward with determination into the new economic cycle. France must prepare itself for this.

There are three ways of responding to the crisis.

The first is to deny it. To explain that it isn’t serious, that the crisis is merely a pretext. That is to lie to the French people and to prepare the way for disasters from which France would not recover.

The second is to opt exclusively for austerity, rigour, deflation. That would be to choose lower wages and pensions. It would be a choice that would place the full weight of the crisis on purchasing power. It would be a choice that would drag everything down, a choice that would risk plunging the economy into a recession, perhaps even a depression.

Another choice is possible. And that is to respond to the crisis through work, through effort and through control over our expenditure. It is an adjustment that is positive. It is a choice that preserves living standards. Between lower pensions and working for longer, I choose the second solution. Between earning less and working more, I am convinced that the second solution is preferable to the first, that it is fairer and will allow us to emerge from the crisis rather than make it worse. It is to choose effort, work, and it is the policy that is being followed with constancy by the government.


The crisis is revelatory first and foremost of our weaknesses. But if we can just see how to learn the lessons from them, crises can also indicate the road to reconstruction and they can give politics a responsibility and scope for action that are, when all is said and done, unprecedented since the Second World War because we need to imagine, to reinvent everything from scratch.

What we must do first is once again attend to what is most urgent, avoiding becoming a target for speculation by dispelling all doubt as to our ability to control our indebtedness and repay our debts. Because doubt will raise the cost of our debt.

In reducing our deficits, we are loosening the grip the markets have on us, we are preserving control over our destiny.

To reduce our deficits we must eliminate our bad expenditure, spending that is useless, that can be dispensed with without reducing the quality of public service, that can be compensated for with reasonable efforts to raise productivity, spending that stems from poor management, poor control, expenditure that we have allowed to drift through lack of courage to reform or lack of foresight.

For decades now, we have been spending too much and often ineffectively. That cannot go on. The habit the state had got into of always saying “yes”, not to those who needed it most but those who could shout loudest or be most obstructive. That cannot go on.

We must reduce our current expenditure by being more attentive to the usefulness of public spending. We must continue to reduce staffing levels in public service by keeping to the rule of non-replacement of one in every two retirees. We must do so with determination. But also calmly and collectedly, without giving way to the febrility and sudden surges of markets.

That is why at the same time as we are saving we must continue to encourage work and therefore overtime, maintain the reductions in social charges and continue to invest, because the key to our future lies in productivity and competitiveness.

France enjoys exceptional advantages that enable it to cope with all forms of competition and hardship. Of all the major developed countries, France is the one whose institutional system has stood up best to the crisis. Thanks to its institutions, France can be governed even in difficult times. (…)

When the global economy entered recession, the French social model turned out to be effective in softening the impact. It has helped the economy to regress less in France than elsewhere.

But who can imagine preserving it without adapting it to the conditions of our time?

We do not educate, we do not provide healthcare as we did in the past. Criminality is not the same as it was in the past. Inequality is not the same. And above all, a new form of inequality has appeared that makes life more difficult for those working at the bottom of the ladder compared with a minority of people who wish to take advantage of the system without taking on their share of duties.

We cannot fund our social welfare system as we did in the past simply by levies on salaries when borders are more open and when we need to confront competition from countries where salaries are low.

Reforming the funding of our social model has become a matter of urgency.

We cannot keep the organization of the social welfare system as it was just after the war in an era when more and more people move between companies, sectors and professions during their working lives.

Faced with the economic and financial storm, to have, as France does, a strong state backed by a long administrative tradition has turned out to be a considerable advantage, whereas a weak state, deprived of all authority, can now be seen as one of the main causes that allowed many countries to be carried away in the storm.

France has advantages envied by many countries around the world. It has dynamic demographics, many young people, talented entrepreneurs, researchers and engineers, a high quality workforce that is hardworking and well trained. It has a long industrial and agricultural tradition, expertise produced by the work of several generations.


It is work that creates work, investment that generates investment.
Working more and better, getting more and better training, investing massively and better, all these are the main levers enabling France to get in step with the new economic cycle.

At a time when unemployment is rising in France, as in most major developed countries suffering from the global crisis, it is our duty to seek out every possible solution to create more jobs. The crisis must not lead us to simply give up. And we mustn’t wait because of a presidential election.

It is right now that we must fight every inch of the way, that we must put all our best minds and willing efforts to work. We will not win the battle for jobs without business leaders, without the social partners.

That is why next January I shall be inviting all the social partners to take part in a summit on employment so that all concerned can offer their solutions and make proposals. We must have the courage to face up to the big issues and lift the taboos on what is holding back French competitiveness.

We have not tried everything where jobs are concerned. When we see unemployment rising, we have no right to say we can’t do anything about it, even if we don’t have control over everything. But ultimately only growth will put an end to mass unemployment.

At the beginning of a debt reduction cycle, which itself brings recessionary tendencies with it, efforts to promote growth need to be more vigorous than ever. That crucial moment when a new model for growth begins to emerge – that is what we mustn’t miss.

The triple revolution of digital technology, environmentalism and knowledge changes everything. It is completely changing every mode of production. It is causing growth to shift from the physical to the virtual, from quantity to quality, from standardization to innovation.

Alongside capital and labour, it confers new importance on other factors of production: intelligence, knowledge, imagination. University autonomy, the Grenelle consultation process on the environment, the crédit d’impôt recherche [R&D tax credit], the €35 billion in investment for the future in higher education, in research and in the technologies of the future are preparing the way for this vast revolution. We must persevere.

This is not the time for us to lose courage, to fall back, to turn in on ourselves, to take refuge in opposition to change, in cautiousness, to reject progress.

It is a time for work, for investment, for enterprise. It is a time when the state must once again innovate, show enterprise, invest, when it must energize those who invent, who create, who build businesses.

OSEO (1), the National Loan programme, the Strategic Investment Fund, all these are tools to finance this long-term revolution. We must carry on down that road.

But we won’t win back control over our destiny on our own. We won’t bring finance back under control on our own. We won’t change the rules of globalization on our own. We won’t get back on the path to growth on our own.

Everyone must understand that France is so bound up with the world, its economy so immersed in the global economy, that there is no difference between domestic policy and foreign policy, between national policy and European policy. Whether inside or outside, it is one and the same policy that a country such as ours must implement to confront one and the same crisis, a global crisis.

Telling French people the truth means telling them that isolation is not a solution, that we do not have a choice between opening up and battening down because the latter would be fatal for our economy, our jobs and our living standards. There is just one destiny for closed societies: decline. Economic, intellectual and moral decline.

It is by being clear-sighted about this, by accepting reality that we will be able to exert influence in Europe and the world and lay down limits that we do not wish to see breached.

This means that we will refuse to erase our borders. They are the precondition for our freedom, our democracy and our solidarity.
This means that we shall defend our identity, our culture, our language, our way of life and our social model.

This means we shall refuse to accept the uncontrolled immigration that would ruin our welfare system, destabilize our society, disrupt our way of life and overturn our values. Immigration is productive if it is kept under control so that those we take in can be welcomed in the best possible circumstances, so that they can come to share our history, our values, our way of life.

It is a certainty that regularizing all illegal foreign nationals in the country would draw in an uncontrollable influx of yet more.

This means that we cannot tolerate persistent dumping, unfair competition and the pillaging of our technologies that is destroying our factories.

Ultimately, the only way we can protect ourselves is to become the builders of change alongside others, rather than solitary adventurers on a road to nowhere.

We should be aware that if we fail together to change the ground rules, the world is in danger of plunging into selfish individualism and protectionism and we would be heading for disaster because then we risk travelling down exactly the same doom-laden road as the world did in the 1930s.

There’s a reality everyone needs to understand, that everyone needs to accept: sovereignty can be exercised only with others.

Europe does not mean less sovereignty but more sovereignty because Europe means greater capacity for action.

Sovereignty is more easily defended with allies than alone. That is the great lesson to be learned from the history of the 20th century. (…)

France and Germany, after so many tragedies, have decided to unite their destinies, to look together to the future. To go back on that strategy would be unpardonable.

History and geography have made Germany and France either rivals or partners. Chancellor Adenauer and General de Gaulle made a historic decision when they chose friendship.

With Germany and France united, the whole of Europe is united and strong. If France and Germany are disunited, the whole of Europe is disunited and weaker. I shall be welcoming Chancellor Merkel to Paris next Monday and together we shall be making proposals to safeguard the future of Europe.

We each have our history; we each have our past wounds. When we talk about currency, Germany remembers its history. We must understand that and we must respect it.

We each have our institutions, our political culture, our concept of the Nation. In one case it is federal and in the other unitary. We need to understand that difference. We must respect it.

France and Germany have chosen convergence. I shall never go back on that choice. That does not mean that one wishes to hang on the coat-tails of the other, or that both wish to abandon their identities to the point of merger.

Choosing convergence does not mean choosing imitation but choosing together to learn the lessons of each other’s experience.

Choosing convergence is about working together, sharing the effort to build at the heart of the European economy an area of stability and confidence that will be the engine of European competitiveness. I shall do everything to ensure this comes about.

Europe is no longer a choice. It is a necessity. But the crisis has shown up its weaknesses and its contradictions. Europe must be rethought. It must be put on a new footing.

This is a matter of urgency. The world will not wait for Europe. If Europe does not change fast enough, history will be written without it.
Of that France and Germany are convinced.

Europe needs more solidarity. But more solidarity demands more discipline.

That is the first principle in putting Europe on a new footing.
Because solidarity must not encourage laxity.

Europe needs more politics. By which I mean more political responsibility.

Europe without politics, Europe on automatic pilot, simply applying competition and free trade rules blindly, is a Europe that cannot cope with crises. It is a Europe that is disarmed. It is a Europe that is condemned to passivity. It is a Europe we want nothing to do with.

Europe needs more democracy. Because Europe is an enterprise that cannot succeed without its peoples. Because if its peoples distrust Europe, Europe will regress. A more democratic Europe is a Europe whose political leaders make the decisions.

More politics is the second principle in putting Europe on a new footing.
Putting Europe on a new footing doesn’t mean an onward march to a more supranational Europe. It doesn’t mean reopening old quarrels between the supporters of a Europe of nations and a federal Europe.

Europe will put itself on a new footing by pragmatically learning the lessons of the crisis. The crisis has driven heads of state and government to take on ever greater responsibility because ultimately it is they alone who hold the democratic legitimacy that permits them to take the decisions. The road to European integration is through intergovernmental relations because Europe will need to make strategic choices, political choices.

Within the Euro Area, we must decide now to go forward fearlessly towards more qualified-majority decision-making.

The Europe that is open to the winds, the Europe that fails to protect itself against dumping, the Europe that opens up its markets without demanding reciprocity from its competitors, the Europe that allows products to enter that do not comply with social and environmental rules, that cannot go on. Europe must negotiate every inch in defending its commercial interests.

The Europe that ensures the application internally of the principle of free movement and which fails to control its external borders, that cannot go on. Schengen must be rethought.

The Europe that tolerates social dumping and fiscal dumping between its member states, the Europe that accepts the fact that subsidies it pays to some of its members to help them catch up with the others are used to lower their social charges and taxes in order to indulge in unfair competition with the other members, that cannot go on.

Europe cannot leave its industrial groups at the mercy of all the world’s predators because it forbids them to group together in the name of a false concept of competition. Europe can no longer ignore the absolute necessity of an industrial policy to support our industries and our exports.

Europe must defend its Common Agricultural Policy because in a world of scarce resources, food security is a key factor in independence.
Europe is going to have to make crucial choices in the weeks to come.
Those choices can no longer be those of the 1980s.

The crisis is an accelerant.

The crisis is a major challenge for Europe. Probably the greatest challenge it has had to face in the whole of its existence.

Let’s face it: Europe may be swept away by this crisis if it doesn’t get a grip on itself, if it doesn’t change.

But in Europe there is the Europe of 27 and the Europe of the euro.
At the heart of the European crisis there is the euro crisis. It is the more serious of the two. It could destroy everything. What will be left of Europe if the euro goes, if Europe’s economic heart fails?

When we chose to go with the euro, we were divided between those for and those against. Each side had its reasons and the arguments of each were worthy of respect.

But that debate is behind us. The euro exists. Its disappearance would have dramatic consequences for the French people. Our debt would become unmanageable. The collapse in confidence would paralyse everything. The French people would become poorer… We have no right to allow such a disaster to come about.

We should see the euro crisis for what it is: a crisis of credibility, a crisis of confidence.

It will be resolved only by restoring credibility, by restoring confidence.
If we want the euro to survive, we have no choice: we must confront in total solidarity all those who doubt the euro’s viability and who speculate on its disintegration.

The mutual solidarity of all the countries in the Euro Area must be absolutely clear. It must be clear that what has been done for Greece, in very specific circumstances, will not be done again, that no country in the Euro Area will now be placed in a situation of default. It must be absolutely clear that in the future no investor will lose a cent on repayment of any loan extended to a country in the Euro Area. That is an issue of confidence and confidence is the key to everything.

It must be clear that every country and every institution is working tirelessly for that total mutual solidarity.

That is the whole reason for the government of the Euro Area that France wishes to see and which will gather together the heads of state and government to take decisions.

That is the reason why France proposed the creation of a European Monetary Fund to provide an instrument for European solidarity able to come to the aid of countries in difficulty. The Fund will mobilize the necessary resources to put up defences against speculation. We shall ensure its long-term viability, we shall strengthen it, and it is my wish that we should allow it to take decisions on a qualified-majority basis.

Naturally, the European Central Bank has a crucial role to play. There is debate as to what its statutes allow it to do. I don’t want to go into that debate. The ECB is independent. It will remain so. I am convinced that faced with the risk of deflation that threatens Europe, the Central Bank will take action. It is up to the ECB to decide when and by what means. That is its responsibility. Nobody should doubt that it will face up to that responsibility, and indeed I am pleased to note that it has begun to do so.

It isn’t possible to envisage total mutual solidarity without stricter discipline. If we want more solidarity, we must have more budget discipline. We must discuss together all our budget policies, not in order to ensure that they are identical everywhere despite the differences in circumstances, but to ensure that they move closer to rather than diverge from each other. Let’s examine our budgets together. Let’s institute faster, more automatic and more stringent sanctions for those who do not meet their commitments. Let’s strengthen the systems for prevention to ensure that the slippage we have seen is not repeated. Every country in the Euro Area must adopt a golden rule that enshrines in its legal system the objective of balanced budgets. France must adopt it. Ideally, if all concerned show a sense of responsibility, this should be done before the presidential election. If not, it should be done immediately afterwards.

There can be no single currency unless economies converge. If the gaps in living standards, productivity and competitiveness widen between countries, sooner or later the euro will be too strong for some, too weak for others; and the Euro Area will disintegrate.
Convergence must be the keyword for the Euro Area.

It is a process that will inevitably be long and difficult.

Since the beginning of the debt crisis – let’s be honest – Europe has disappointed. Not fast enough, not far enough, not strong enough. I hear those criticisms. I’ve sometimes shared the impatience felt by observers. But the task was so difficult. The Maastricht Treaty has turned out to be imperfect. It provided for preventive mechanisms but with many gaps, for sanctions, but applied very little, and there are no emergency instruments.

We’ve had to reinvent everything, to rebuild everything, and we’ve occasionally rediscovered that our concepts of economic policy and monetary union had continued to differ despite 10 years of shared existence.

Now, in extreme circumstances, after the long road we have travelled, we must get back to what is essential and solemnly reaffirm it. That is why France is arguing, alongside Germany, for a new treaty.

More discipline, more solidarity, more responsibility accepted before our peoples and genuine economic government. That is our vision for the future of the Euro Area and future treaty reform.

To ensure that in the world of tomorrow Europe will still be able to make its voice heard and breathe life into a very ancient idea of civilization to which it is committed above all else, it is for that that France is fighting.

To ensure that in the world of tomorrow each of us, by developing, will contribute to the development of the others rather than each seeking to develop at the expense of the others – that is what France is fighting for.

To ensure that in the world of tomorrow cooperation prevails over confrontation – that is what France is fighting for.

To ensure that in the world of tomorrow its values, its lifestyle and its culture are not doomed to disappear – that is what France is fighting for.

To ensure that French people do not see wiped out all the great and beautiful things they have built through their hard work, intelligence and generosity – that is what France is fighting for both internally and externally.

And France is leading this fight without arrogance, but tirelessly, in the firm belief that even at the lowest point of the worst economic crisis to threaten the world for three-quarters of a century, it bears hope that must not be extinguished.

Long live the Republic.

Long live France./.

(1) French body providing assistance and financial support to small and very small French businesses at crucial moments in their development. By sharing the risk, it facilitates their access to financing by banking partners and equity capital investors.

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