After George Papandreou’s surprise decision to ask the Greek people if they would prefer five years of austerity or five years of austerity with a side order of chaos, Nicolas Sarkozy’s best-laid plans for Cannes have had to be, well, canned. He launched his presidency of the Group of 20 leading nations with calls for a new Bretton Woods – a wholesale reconstruction of the international monetary system – and a global plan for renewed growth. Even though the referendum has now been scraped, these grand French aims, some of which were unrealistic anyway, will inevitably take second place to the eurozone’s worsening agonies. Cue the visiting Americans and Chinese calling on the Old Continent to get its act together.
That is unfortunate, and Mr Sarkozy should try to wrest at least part of the agenda back on to the longer-term issues. Behind the scenes, on the lower slopes below the summit, a group of ‘sherpas’ have been working hard. There has been little appetite for fundamental reform a la française. The so-called mutual assessment process, which was supposed to lead to a set of indicators to measure global imbalances, and promote action to correct them, has run into predictable opposition from China, in particular.
But something could be rescued from the wreckage. Of course there will have to be a general commitment to sustaining economic growth. It will only be of value, however, if it is buttressed by specific commitments to strengthen the resources of the International Monetary Fund (and the European financial stability facility) to provide help to the walking wounded, whose problems threaten to derail the summit and, more importantly, the global economy. There is a clear common global interest there, and sometimes peering into the abyss, as the summiteers are now doing, can shift entrenched positions.
A British-led group has been working on unglamorous issues surrounding the Financial Stability Board, proposing that it be given a legal identity and added teeth. That would be a step forward. There are clear signs that the early enthusiasm for global regulatory agreements has dissipated, with many countries going their own way, creating damaging uncertainty in financial markets. That is partly because, between summits, there is no sustained global leadership.
Another group has been working on infrastructure finance. There is a huge need today for investment in transport networks and energy generation in particular. When long-term interest rates are so low there must be some positives from reconnecting finance with investment needs.
We cannot expect an earth-shattering headline deal from Cannes. But often the Palme d’Or winner at the film festival is a disappointment, while some of the second rank offerings can be rewarding, and longer-lasting. That may be the best we can expect this weekend. Ce n’est pas magnifique, but it’s the nature of the economic war we’re in.
The writer is professor of practice at Sciences Po in Paris, and former chairman of the Financial Services Authority, former deputy governor of the Bank of England and former director of London School of Economics.