Visit to Russia
St Petersburg, June 19, 2010
Ladies and gentlemen,
Let me begin by saying that it’s a great pleasure for me to be here in St Petersburg, in Russia, at President Medvedev’s side. I want to say that I’m absolutely sure of one thing: we, Europe and Russia, must work together strategically, very closely and in a relationship of trust. The Cold War era is over. As is that of the Wall. Russia is a great power, we are neighbours, and we are destined to be friends. We must draw closer together. This is a deeply-held belief, coupled with another: I want to say how much confidence I have in President Mevedev’s word, how much I have appreciated being able to work with him at moments when we haven’t spontaneously agreed, but have succeeded in finding a path together.
I want to testify to the fact that in the major international fora, France and Russia’s positions are extremely close. I also want to salute President Mevedev’s commitment on the Iranian issue, on the adoption of the sanctions. Nothing would have been possible had he not lived up to his responsibilities and made this choice. That shows you that being here for me, at the head of an important delegation of ministers and business leaders, is a strategic choice.
ECONOMIC AND FINANCIAL CRISIS/MARKET SPECULATION
Secondly, the crisis. (…) Why did the world experience the century’s most difficult and deepest crisis? To my mind, it’s because we have neither global governance tailored to the 21st century nor a system of regulation tailored to globalization. (…) This total absence of regulation led to the following results: the market was no longer operating as a genuine market, but was driven by speculators. When the market operates without any rules, when the world operates without any regulation, the market stops being the market and is taken hostage by speculative activities, by the creation of an infinite number of bubbles:
Internet bubbles, property bubbles and financial bubbles. Since everything had become possible, some operators took advantage of the situation and deemed it had become normal to increase their stakes by a factor of 10, 20, 30, 100 and 1,000 without this corresponding to any scientific invention, any creation of value or any growth strategy. To those who tell me: “you have to let the market do its thing”, I agree, provided that the market isn’t one of speculation but production.
And on 18 September 2008, the astounded world witnessed the unthinkable: the bankruptcy of one of the world’s largest banks, an American one. Confidence evaporated and everything collapsed. Don’t resent the heads of State and government for saying that it isn’t for those who took us to the edge of the precipice today to explain how we are going to put the crisis behind us. Of course, we mustn’t throw the baby out with the bath water by going from a total lack of regulation to over-regulation and from recognizing that the tragedy emanated from the financial industry to abolishing the financial industry. Quite obviously no. But similarly, so that things are clear between us, we won’t let the same causes produce the same effects. That would be intolerable since those suffering from the crisis today, I mean our peoples, weren’t the slightest bit responsible for it. And so it’s unacceptable for them to pay the bill, for the irresponsible behaviour not to be punished or us not to have the courage to accept the task of ensuring they aren’t allowed to do it again.
Let me take some examples. The tax havens: what good would it do to establish rules for Russia, France, Europe, the world and let our own banks invest, open accounts in tax havens where people can escape rules in any shape or form? This is why, with Dmitri, we fought at the London G20 to prevent the tax havens any longer being a way, for a number of our own businesses, of avoiding the rules which, elsewhere, we’re asking people to obey.
Trader remuneration: what could be more normal than people earning money? What could be more normal than not all of them earning the same? But this idea of pay, in our banks, depending on the risks they take with other people’s money, no! If banks want to earn a lot of money by taking risks with their own money, no problem. Taking risks with other people’s money, no. We could find more and more examples.
And so next week, with Dmitri, we’re going to fight at the G20 for the Toronto G20 to implement the decisions we took at the Pittsburgh and London G20s. And I say here, and take responsibility for what I say: I am in favour of taxing banks. To me it doesn’t seem abnormal for them to fund their own insurance system. After all, it isn’t for taxpayers to pay for this system. And, secondly, [I favour] a global system of taxing financial activities. I would be totally ready, of course, to give my reasons, but I don’t want to speak for too long.
So, here’s a first absolutely essential item on the agenda: a global market must be matched by a global harmonization of the rules, so that there’s global regulation. Freedom entails respect for the rule of law. The rule of law demands respect for rules. The rules must be as similar as possible in the world. Freedom isn’t the law of the jungle. It isn’t the absence of regulation.
Secondly, and this will be one of the themes of the French G20 and G8 presidency – I’ve already talked to President Medvedev about it – we must as a matter of urgency think about the foundations of a new international monetary system. We are operating on the basis of the Bretton Woods system, established in 1945, at the time when our American friends were the world’s only great power when, with the Marshall Plan, the dollar was the world’s only currency. I ask: in 2010 are we in the 1945 situation? The answer is obvious. And I told President Medvedev that I wanted Russia and France to spearhead the debate on organizing the operation of a new international monetary system allowing you, business leaders, to compete on a level playing field in the world without having to withstand intolerable monetary dumping. The aim isn’t to accuse some or criticize others, but to get the major players round the table and define this new international monetary order. Let me remind you that in Bretton Woods they took a year to do that, and it didn’t operate that badly until the 1970s, if I remember rightly, when there was the gold/dollar convertibility problem. The time has come to have the 21st century’s monetary system: regulation, and a new monetary system.
I would like to talk about a third item which will be a priority of the French G20 and G8 presidency: commodities. And I put this question in Russia, a rich country, with exceptional resources and virtually infinite space: who today understands anything about the way commodity prices are decided? And if anyone here in the room can answer it, I’ll be very happy for him to pass on his knowledge in some private lessons I urgently need.
The crude oil price goes from one extreme to the other. Everyone panics when it’s $142 and everyone rejoices when it’s under 40. They are very wrong, since when the oil price is too low, it isn’t good for research and when it’s too high, it isn’t good for growth. Contrary to what I sometimes hear said, minimum regulation is in the interest of both producer and consumers. I could easily give a lot of other examples showing that these markets aren’t transparent, don’t obey market rules, but are driven by speculation. Here too, hasn’t the time come, not to control prices, that’s ridiculous, but to think about a system of regulation, transparency, minimal organization for agricultural commodities and major fossil fuels which would benefit both producer and consumer countries?
Lastly, final issue, at any rate from my point of view: global governance. It’s nevertheless pretty spectacular to see that we’ve been in the 21st century for 10 years without taking on board any consequences of the change of century. At the end of the day, the only consequence has been the creation of the G20. I remember my surprise, at the first G8 I attended in Heiligendamm in Germany, at spending two and a half very interesting days discussing with my colleagues and on the third day seeing the arrival for a lunch of the representatives of two and half billion inhabitants, to whom we devoted no more than an hour and a quarter of discussion. Who can seriously accept the idea that we can resolve the world’s major problems without asking the opinions of China, India, Brazil and Mexico, or taking the slightest account of a single African country, when Africa today has a billion inhabitants and will have 2 billion in 50 years’ time? Who can think that’s reasonable, fair?
Finally, we created the G20 because we thought we needed to bring in these countries which are demanding their rights, and quite rightly so, but to whom we are saying, in return for these rights, that we require them to exercise their responsibilities. The UN system, to which we are committed, functions impressively slowly. In fact, that’s not the only thing that’s impressive. That strange idea that 192 countries can take decisions by consensus is at the limit of credibility, as the disastrous Copenhagen Conference showed. So we must change global governance.
To sum up, we’re changing world governance so that everyone is on board; we’re laying the foundations of financial and economic regulation to prevent disaster; we’re regulating commodity prices so that our economies aren’t taken hostage, and laying the foundations of a new reform of the monetary order to rule out the possibility of dumping. Is this impossible? Is it dangerous? What’s impossible is sitting on our hands. The world is changing and we seem to be waiting for the sky to fall on our heads. Is that dangerous? Less than not learning the lessons of this crisis, because if we don’t learn the lessons of the crisis, you can be certain it will start all over again.
Finally, I’d like to conclude by saying that today we can reasonably be optimistic provided – and we are doing this – we are vigilant, work together and do what’s necessary to reduce the deficits and not kill growth which is returning.
And for us, Europeans, I dream of a new organization reuniting Europe and Russia in a gigantic common economic area with people and goods circulating together and us organizing our security together on the basis, moreover, of the proposals President Medvedev presented on this when he came to Evian, I believe a year and a half or two years ago. The idea that Russia has to defend itself from Europe and Europe has to defend itself from Russia is an idea which belongs to a long-gone past.
The idea, on the other hand, that we have to confront the same threats of terrorism, the Mafia, these threats are the same, so we must confront them together, is a forward-looking idea, a promising idea. I am not unaware, moreover, that we Europeans have to make a great effort to organize ourselves better. (…) But I ask you, my Russian friends, to understand one thing: Europe is a miracle, 27 countries as different as ours who agree together on everything. Do you imagine this is easy? Do you think it’s done spontaneously? 27 democratic countries which democratically decide to be together and share their sovereignty on virtually every issue. At times people say: “your decision-making process takes so long”. This is true, but imagine having to take decisions with 26 other countries. So it’s true that we’re pushing hard for an economic government, we’ll get there. 16 of us already have the same currency. And, after all, we’ve managed to set up a €750 billion fund, which is more than the United States has done, but taking this decision with all the Europeans. At times I tell myself that if people wanted to be objective about Europe, they wouldn’t judge us as if we were one and the same country, but in the light of the results obtained by the 27. I can tell you that it’s very hard work.
So there you are, ladies and gentlemen; I had prepared a speech and you’ll get the written text. It doesn’t much resemble the oral version I’ve just given you, but I said to myself, for my first visit to St Petersburg, at Dmitri’s side, it was much better for me to speak from the heart. (…)./.