By common consent, Nicolas Sarkozy has had, for the most part, a good financial crisis. But he slipped up this week when he suggested European Union member-states should create their own sovereign wealth funds to invest in European companies and stop foreigners from buying up “strategic assets” on the cheap.
This proposal was flawed on so many counts that it is hard to know where to begin. But here we go. First, there is no evidence that non-European sovereign wealth funds are trying to seize control of strategic or even non-strategic European assets, least of all by means of hostile takeovers. Dark hints to the contrary do nothing but harm the EU’s relations with the countries where the funds are based. In fact, they risk deterring the funds from making benign investments in Europe.
Second, the EU is, or aspires to be, an open economy that prospers by investing abroad and accepting inward investment. For sure, the field on which the EU and its commercial partners play must be as level as possible. But if Europe tries to tip the balance in its favour, as Sarkozy is suggesting, it will soon find that others can play at that game, too. Everyone will lose.
Third, the degree of state intervention implied by Sarkozy’s idea goes far beyond anything needed to extricate the EU from financial crisis and economic recession. Fourth, EU governments do not have the spare cash to do what Sarkozy has in mind. Fifth, even if they did, many would not want to. His proposal is inappropriately divisive for a country holding the EU’s rotating presidency and, in particular, has exposed yet another area of disagreement between France and Germany.
Sixth, it would be rank hypocrisy for the EU to complain about the supposed political motives behind the investment strategies of non-European sovereign wealth funds, while European nations set up their own funds for reasons that were transparently political.
Seventh and finally, why does Sarkozy need sovereign wealth funds, anyway? France already has its very own Caisse des Dépôts, the state-controlled financial institution which owns stakes in most big French companies and which describes itself, entirely accurately, as the most important long-term investor in the French stock market.
Believe me, as long as the Caisse des Dépôts exists, no one in Paris need fear that the Saudis, Chinese or Russians are going to get their hands on French car producers, arms manufacturers or makers of delicious yoghurt.
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