At Cannes G20 Summit, Europe’s Currency and Leadership Pushed to the Brink

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They may be clichés, but the phrases “life isn’t always fair”, and “things don’t necessarily work out the way you’d like” are cruel realities that French President Nicolas Sarkozy has to be ruefully mulling over just now. Rather than basking in the sunlight of a France-presided G20 summit meant to usher in major international reforms, Sarkozy finds himself hosting the group’s meeting in Cannes focused on the far narrower objective of simply saving the euro from calamitous implosion. Instead of pro-actively changing the world to prevent future turmoil, Sarkozy has been forced to limit his efforts to preserving a European status quo once considered unquestionable. And even if that rescue ultimately proves successful, the entirely defensive achievement won’t do much to strengthen the president’s anticipated re-election appeal to French voters next year, who feel Cannes has shown Sarkozy again failing to live up to their leadership expectations.

When life isn’t fair, it’s also pretty darn hard.

Why unfair?  Because the debt crisis imperiling the euro isn’t Sarkozy’s creation (or at least not his alone). But he’s not the only European leader facing potentially dire political fallout from it. Greek premier George Papandreou may not finish the day in office. Italian Prime Minister Silvio Berlusconi appears doomed by his ineffective responses to Italy’s debt-driven troubles, which have lengthened a long list of problems and scandal that analysts predict will provoke his ouster soon. Voter fury in Spain over the management of the economy there is so great that Socialist leader José Luis Rodriguez Zapatero isn’t even bothering to run in looming elections the ruling left looks sure to lose. And British Prime Minister David Cameron—whose country doesn’t even use the euro—finds himself facing rebellion from fellow conservatives seeking to exploit the current crisis to get the U.K. to extract itself from the European Union.

But the hijacking of the G20 summit and agenda by the euro emergency is particularly painful for Sarkozy’s expected re-election bid. When France assumed presidency of the G20 and G8 a year ago, Sarkozy laid out an activist agenda of change to harness elements that contributed to the global financial sector crisis of 2008-2009—and which have remained sources of instability since then. Sarkozy had planned on pushing through sweeping regulation of the financial sector—including far greater transparency and accountability of derivative trading—and possibly impose a new system of taxes on deals and profits in it. The French President also hoped to negotiate new controls to limit price volatility on essential commodities, and clamp down on tax havens and off-shore banking hot spots.

Perhaps most significantly, Sarkozy pledged to broker reform of the entire international monetary system to make it more stable—an effort that would have submitted the Chinese yuan to more accurate valuation, and given the euro a status rivaling the U.S. dollar as an international reserve currency. Obviously, that promotion of the euro is well off the table these days—as are longstanding European exchange rate demands on a China now being desperately courted to help fund the most recent EU debt bailout package.

To be sure, by having had to reduce the G20’s focus to the economic storm buffeting Europe, Sarkozy is being seen by French voters as fighting the good fight. But the French public until recently had never been given any reason from their leaders for concern. Far from being applauded for agreeing on brave new measures to prevent future global upheaval, then, Sarkozy and other EU leaders will get only minimal credit even if they can resolve a crisis allowed to develop on their beat.

That will have political consequences—especially for heads of state heading to the polls. Unfair as it may be, voters tend to reward leadership that demonstrates audacity, determination and initiative more than they do defensive moves to keep the worst from occurring. That’s a particularly sensitive consideration six months ahead of French elections. Far from the monumental reforms Sarkozy had hoped to take away from Cannes, the biggest achievement he’s likely to import from the meeting to his 2012 re-election campaign is, “It could have been worse.”  That’s not an argument most voters seem impressed by in polls—and it certainly pales to the world-changing plans Sarkozy had broadcast for the Cannes summit.

As mentioned, the drama has other EU leaders already bowing out—or on the brink of being ejected from power. Sarkozy, by happy contrast, is fixed firmly in office for the six months ahead of France’s next election. So why is the minimalist, albeit urgent Cannes focus so prejudicial to the Frenchman?

Because it’s another extremely public demonstration of how Sarkozy has failed to deliver on most of the proposals and promises he was lifted to power with in 2007—inspiring calls and visionary stances that have frequently come to naught. Early on, he triumphed by defiantly bringing the pariah leaders of Libya and Syria back into the international community—and we know how that turned out. Then, Sarkozy responded to the shocking greed and irresponsibility that produced the near meltdown of the international financial system by vowing to “moralize” business from his role as “the reformer of global capitalism.”

“Laissez-faire is over,” Sarkozy pledged in Sept. 2008. “All-powerful markets that are always right, that’s over.”

French society still wary of capitalism—and latently antagonistic to the rich and powerful—greeted Sarkozy’s crusade with applause that spanned the political spectrum, and even echoed abroad. But Sarkozy soon failed to carry out threats to walk out of the Dec. 2008 G20 summit in Washington if deep, sweeping market regulation wasn’t agreed there. Renewed threats to boycott the G20 meeting in London the following year were similarly dropped, despite Sarkozy’s knowledge no significant agreements on international finance would result there either. And even at home, marquee reforms promised to render France more productive and wealthy failed to materialize. The result of that is, a large majority of French voters polled now say they have no faith in Sarkozy’s leadership, nor in his ability to help solve the euro crisis and array of other challenges facing the president.

All that explains why even if the euro crisis—and its domination of the G20 summit—represents a painful black eye to responsiveness and efficiency of EU leaders, Cannes is shining a particularly harsh light on the shrinking, and ultimately vanishing ambitions Sarkozy had for the meeting. Just six months ahead of France’s next election, that represents a particularly hard blow to an unpopular president who’d planned to use his prowess on the international stage to woo back voters who had soured on his domestic achievements. At this point, it may take a small miracle to preserve the euro and its current membership list. The same could be said for Sarkozy’s re-election.

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