A couple of weeks ago, French President Nicholas Sarkozy, currently President-in-Office of the European Council during the French Presidency of the EU, proposed a European bail-out fund for Europe’s financial institutions. This was not well received. But now the irrepressible Nicholas bounces back with a new wheeze. (“Boing!”, said Zebedee. Those of you old enough, like me, to remember the BBC’s Magic Roundabout must have noticed the uncanny resemblance between Sarkozy and the spring-loaded, bouncing puppet).
He’s decided (Sarkozy, not Zebedee) that he wants Europe to have a Sovereign Wealth Fund. If all those oil producers like Russia and Abu Dhabi, and manufacturing/exporting nations like China, can have Sovereign Wealth Funds, and can go round buying up Western companies, then Europe must do the same.
If only Nicholas would sometimes think before he bounces. One of the reasons these countries have Sovereign Wealth Funds is because they have a lot of wealth. But just now, the EU and its member-states are not particularly flush with cash. They don’t have oil — or not enough. They have recently enjoyed only moderate success as exporters. And they have huge commitments in terms of welfare states, social security programmes, unemployment benefits. Those countries with Sovereign Wealth Funds have, for the most part, avoided squandering their wealth on over-generous social programmes.
And though Nicholas may have missed it, western countries have large and unexpected new calls on their depleted exchequers. Like the bail-out of the banks. Most are borrowed to the eye-balls, and sinking deeper into debt. Where is his new Fund supposed to come from?
Of course the French love a dirigiste, corporatist approach to industry, and nothing would please them more than a back-door nationalisation of the commanding heights of the economy. Those of us who value liberty and prosperity (and have some idea about how liberty and prosperity are best promoted) will resist further nationalisation.
But the greatest flaw in the French President’s thinking shouts out from the very name of his idea. Sovereign Wealth Funds. That kind of implies a sovereign nation that funds and backs the Fund, doesn’t it? Which one could he have had in mind?
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