The Sarkozy Threat

I’m still not really sure what to make of Sarkozy’s reported threat to pull out of the eurozone during negotiations for the €750bn safety net announced last week.  I always thought it was strange how small a role the French have been playing in the Greek drama, with Germany seemingly calling all the shots, despite the fact that French banks hold some €34bn of Greek bonds, compared to just €20bn for German banks.

So is it better to have the French sitting on the sidelines, or making bombastic threats they (presumably) won’t follow through on?  Was this simply a negotiating ploy, or would Sarkozy actually consider dropping the euro, and if so what would that look like?  Recall that in the lead-up to the April 2009 London Summit, Sarkozy threatened to walk out if there weren’t “concrete” results on financial regulation.  Are empty threats and ultimatums now the cornerstone of France’s international economic policymaking?

On a related note, I’m surprised there seems to be little momentum behind the Johnson/Boone argument that Dominique Strauss-Kahn faces a significant conflict of interest between his current position as head of the IMF and his widely known aspirations for the French presidency.  Especially when DSK demonstrates he’s not shy about discussing European economic policy by, for example, calling for fiscal transfers between euorozone countries, which would be a rather radical step (which doesn’t mean it’s not a good idea, but just that it’s one only European politicians can take).

It’s easy to imagine a policy disagreement between Strauss-Kahn and Sarkozy seamlessly translating into political talking points for the 2012 campaign, and clear that both would be eager to claim credit for restoring health to the French/European economy.  And from that point it’s not a stretch to wonder whether, as DSK shapes the IMF’s response to the European crisis, is he thinking about the interests of the 186 member nations he’s meant to be serving, or those of potential French voters?

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