Beyond the European financial market. The European debate on the world monetary and financial situation is finally being extended to the fundamental questions. I'm not referring to efforts aiming to move forward the unification of the European financial market, against the backdrop of the completion of the greater European market as a whole. This is a work in progress. For the Stock Exchanges, the (European and national) political authorities had firstly spoken out in favour of intra-European mergers, particularly between France and Germany, with the involvement of Italy. Developments were actually quite different, and it is explained to us today that the Franco-German merger would have been unreasonable and that it would be better to shore up London's position and the arrival of the Americans still further. I take note of this, whilst leaving these dossiers to those who know the most about them, to the initiatives by the Commission, negotiations between the member states, and debates between the members of the European Parliament, even though these latter do not very often manage to agree among themselves. According to MEP Jean-Paul Gauzès, the objective is “an integrated, open and competitive European financial market, in which capital circulates freely at the lowest possible cost and with an appropriate level of prudential control, in order to guarantee financial stability”. Who does not share these objectives? The president of the economic and monetary committee of the EP, Pervenche Berès, however, takes the view that the current balance between the responsibilities and obligations of the operators is not enough: supervision should be reinforced, and a “code of conduct” for hedge funds would be most welcome.
Very good; discussions are moving forward. Yet it is not to these aspects which I refer, but to the impression that we are now starting to talk openly about something that seemed to be reserved for specialist works, and which is still largely hidden from view by political decision-makers, i.e. the almost unbelievable weakness of the international monetary and financial equilibriums. Having witnessed the collapse of the Bretton Woods system whilst still a young journalist, I wonder if the current imbalance is not just as accentuated and dangerous as that which put an end to the convertibility of the dollar into gold. Richard Nixon's dramatic announcement, on 15 August 1971, that the United States was to end the gold standard of the dollar and that its value would, in future, be set by the market, opened up a new period of world history; we may perhaps wonder whether this has not reached its limits.
Not even Nicolas Sarkozy… Today, over 50% of American government bonds are held by foreign Central Banks, with the Chinese Central Bank at the top of the list. If these banks were to call for them all to be paid back, the dollar would collapse. So why don't they? Not only because of the devastating effect this would have on the world economy, but, most of all, because their own monetary reserves will be partially destroyed. And which country would allow the result of years and years of efforts to go down the drain? This means that the vast majority of the dollar reserves will be staying where they are; far from shrinking in size, these reserves continue to swell.
Actually, the anomaly that third countries are, in practice, funding the trade deficit of the United States and the purchasing levels of the American consumer, was vigorously criticised in the early 2000s. It was described as immoral, imperialistic, you name it. But nobody can, or will, really put an end to it. The countries of the EU themselves would be terrified to see the United States stopping their overseas buying; they would make every effort to channel more and more exports on to the American market, and see the declining dollar as a threat.
I believe that on this, the attitude of the European authorities is not up to the mark. Even though he is determined to break all taboos, Nicolas Sarkozy has remained on the surface on this one. His remonstrating against the increase in euro interest rates, which have been held responsible for the fall of the dollar, scarcely touch upon the causes of the situation, which lie in the artificial nature of the performance of the dollar. Back in 2000, analysts and experts raised the question: how long will the current deficit of the United States be sustainable? According to the Encyclopaedia Universalis, which periodically updates its analyses, the critical threshold has been clearly exceeded. But the blame does not all lie on one side. If we accept that the United States are “the bankers of the world and its police in the fight against terrorism”, then one way or another, there is a tab to be picked up.
A not particularly reassuring alternative. Since the analyses of the year 2000, the situation has changed, and another possibility has been taken into consideration; but it is not a reassuring one, by a long chalk. China, which is now, and by some distance, the largest holder of dollar reserves, is in a position to become the owner or co-owner of a large proportion of the major national and multinational companies, the world over. If it is politically impossible and economically unreasonable to change a huge chunk of world reserves in dollars into another currency, it is, on the other hand, possible to use them to take control of a considerable proportion of the global economy. The repercussions of this are staggering.
What the experts say. The reader will have understood that the above paragraphs do not stem from my own wild imaginings or from any confidential information. It was economists, university professors, and other experts, who came to the conclusions that I have summed up in my own clumsy way, trying to avoid technical terms and specialised language.
Last month, Gerard Lyons wrote (in the Financial Times) that the most common words on the planet will no longer be “Made in China”, but “Owned by China”. The state capitalism which dominates (not only in China, but also in Russia and the Middle East) could “change the world” if only it starts to move the resources which it continues to accumulate, transferring them from investment in public shares to investment in share-holder stakes”. I have noted that the assessment of the sums of money available for such operations varies considerably depending on your source: if you put together the monetary assets of China, Russia and the Middle East, the figures vary from 2,500 billion dollars to twice that.
Whatever the amount really is - and I am now quoting the economist Massimo Mucchetti, from Italy's largest daily newspaper, Corriere della sera - extremely significant portions of the economies of the democratic countries which have opened up their markets to foreign “property rights” (rights which represent “the ripest fruit of globalisation”) will become the property of “financial muscle centres, controlled by governments which do not offer the same guarantees of political democracy and economic liberty, nor of respect for the natural environment or human employment”. The author reminds us that the Chinese economy is still controlled by the government by means of state organisations, that the Kremlin owns Russia's main companies and picks their private leaders itself, and that the financial power of the Middle East adds to similar situations the risk of an overlap between business and religion.
The deafening silence of the political decision-makers. What's really astonishing is the silence of the political decision-makers. Debates with the president of the ECB get no further than the surface, and what is asked of him (not to raise interest rates) would do nothing to resolve the underlying question. When will we see a debate at the European Parliament or, at the very least, in the committee chaired by Pervenche Berès? When will there be a speech by the president of the European Commission, Mr Barroso, or by one of the commissioners, taking account of the aspects to which I have referred? Or even an explanation by the president of Eurogroup, Jean-Claude Juncker ?
The doctrine of the United Kingdom. On top of the problems I quote, comes one which is internal to the European Union, and essential to it: the problem of British interests and behaviour towards those of the continental countries. The doctrine of the City of London is summed up admirably in the “Wimbledon Theory” (named after the world's most important tennis tournament): what matters is that the best men and women on the tour take part in it, not that it is won by an English man or woman. In monetary and financial affairs, we can understand London's behaviour: what matters is that operations are free to take place and that there are a great deal of them, that it is all bought and sold as often as possible, because each operation brings with it big fat commissions. It doesn't matter who owns the money and the shares.
One could get the impression that this British way of doing things is less and less satisfactory to the continental countries. Europe can no longer ignore how things are done elsewhere: China has created a State Fund, worth $200 billion, for investments in shares and real estate abroad; the Kremlin negotiates and directly controls agreements concerning Gazprom and other businesses in the energy sector; even in the United States, the US Committee on Foreign Investments tells the White House which foreign investments to block if it believes that they represent a danger to national security. How could the European authorities turn a blind eye to this situation? Well, actually, they don't. They intervene, not only in France, Italy and Spain, but also in Germany, where the creation of an Agency tasked with advising the government in its examination of cases in which the acquisition of German companies by foreign public operators should be blocked, has just been announced.
If the EU wishes to exist as an entity, then there should be differentiation between operations carried out between European companies - which quite simply fulfil the rules of the single market - and operations of third-country businesses: there should be a “Community preference” in this vital sector. But London would never agree to it. And this is one more case, perhaps the most important, in which the participation of the United Kingdom in future developments of European integration will, sooner or later, be called into question.
(F.R.)