FRENCH PRESIDENT Nicolas Sarkozy has hailed the Brussels agreement as marking the birth of a new, two-speed Europe led by the euro zone.
Mr Sarkozy called the deal “a decisive step towards European integration” and said there would now be “two Europes”, with the UK representing the outer circle.
“You have to understand this is the birth of a different Europe, in which the watchwords will be the convergence of economies, budget rules and fiscal policy,” Mr Sarkozy said in an interview with Le Monde yesterday.
When it was put to Mr Sarkozy that he had pushed the UK onto the sidelines: he replied: “I didn’t see it that way. We did everything, the [German] chancellor and I, so that the English would be on board.
“But there are now clearly two Europes. One that wants more solidarity between members, and regulation. And one that is attached solely to the logic of the single market.” Mr Sarkozy said he hoped the European Central Bank’s recent moves to avert a new credit crunch would help economic growth and ease the “unwarranted concerns” about sovereign debt. “I have confidence in the ECB in its deciding, in the future, on the strength of its intervention,” he added.
While Germany wanted to remove political discretion from the fiscal sanctions procedure under discussion last week, France fought to allow politicians have the last word on any decision to punish a country for breaking budget rules. Mr Sarkozy stressed yesterday that no new powers would be given to the European Commission or the European Court of Justice to enforce fiscal rectitude. “Not a single new area of competence will be transferred to any supranational authority,” he said.
Despite the UK’s decision not to take part in the “fiscal compact”, Mr Sarkozy said Paris and London would continue to work together on issues of common interest. He praised British prime minister David Cameron for his “courage” over Libya and said Britain and France shared a commitment to nuclear energy and defence co-operation.
Despite last week’s agreement, France remains concerned about its triple-A credit rating, which is considered the weakest among the six top-notch ratings in the euro zone. In a rhetorical shift, Mr Sarkozy appeared yesterday to begin preparing the public for a possible downgrade.
“It would be one more difficulty, but not insurmountable,” he said, adding that he would respond “with a cool head” if it happened.
The president had previously refused to publicly countenance a downgrade, which would raise France’s cost of borrowing and put further pressure on its public finances.
On his domestic economic agenda, Mr Sarkozy said France would stick scrupulously to its deficit-reduction targets, which aim to reduce the public deficit to 4.5 per cent of gross domestic product next year and back to or below an EU-agreed limit of 3 per cent of GDP in 2013.
He promised to get there with a series of belt-tightening measures that his government has already announced and said he would do so without lowering wages and pensions. “If we went in that direction, it would plunge France into a recession and deflation,” he said.
Many economists estimate that France is already in recession and believe that the government forecast of 1 per cent growth next year, on which it has built its budget, is too optimistic.
In a further sign that Europe is becoming a political wedge between the two main parties in France, the Socialist Party’s presidential candidate François Hollande said he would renegotiate the Brussels accord if he won power next spring.
The socialists have criticised the deal for putting too much stress on austerity and not enough on economic growth. They accuse Mr Sarkozy of having given too much ground to Dr Merkel and reject calls for France to adopt a German-inspired “golden rule” that would commit the country to balance its budget.
Mr Hollande said the deal should have allowed for a bigger ECB role and issuance of common government bonds in the euro zone.