Thank you to Nicolas Sarkozy for providing such a dramatic and timely re-enforcement of my Tuesday column (see below). No sooner had I subtly insinuated that he was going crazy, then he took to the stage at the European Parliament and gave a speech calling for the creation of a European sovereign wealth fund. Its mission – it seems – would be to buy up strategic chunks of European industry.
The global financial crisis seems to have liberated Sarkozy to give public voice to the kind of stuff that French politicians normally save for late-night drinking sessions - capitalism needs taming, the Americans are crazy, we can’t have the Asians buying up our businesses, why can’t the state subsidise more big industrial projects…etc, etc. It’s all coming out.
So let me point to a few obvious objections to this sovereign wealth fund proposal. First, these kinds of funds are generally set up by petro-states that are rolling in cash – Abu Dhabi, Russia, Norway etc. I haven’t noticed that the public coffers of the European Union are overflowing with funds that we simply don’t know what to do with.
Second, one of the things about SWFs is that most of them, have generally made sensible investments, for non-political purposes. Sarkozy seems to have something entirely different in mind: a fund that would be used to fend off unwelcome foreign investors, like that outrageous suggestion that Pepsico might buy Danone. Again, this seems a slightly dated concern. Give it a few months and we’ll be screaming for foreign investment.
Finally, small European states will rightly fear that any investments by an EU fund will be directed towards those nations with the most political muscle. And that is a recipe for a breakdown in the European single market – which is absolutely the last thing we need, in response to a recession.
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