Sarkozy is quoted as demanding what is certainly the Fed's greatest nightmare: a return to Bretton-Woods. He furthermore notes, logically, that undervaluation of currencies counters trade, and that the financial system can not tolerate monetary dumping.
"The G20 prefigures the planetary governance of the 21st century,"
Mr. Sarkozy said, taking particular care to single out the new global
accounting rules being worked out under the auspices of the G20.
Mr. Sarkozy's comments come amid concern the reforms promised by G20
members are beginning to lose momentum as the economic crisis recedes.
They also come less than a week after U.S. President Barack Obama
announced plans to reform the U.S. banking system which appeared to
threaten the consensus forged in G20 meetings in London and Pittsburgh
last year. However, Mr. Sarkozy said he supports Obama's plans.
Elsewhere in his speech, which departed frequently and extensively
from a prepared text distributed locally, Mr. Sarkozy renewed his
attacks on "monetary manipulations" in general and the supremacy of the
dollar in particular.
"It cannot be that...we have a multipolar world and a single world
currency," Mr. Sarkozy said. "We need a new Bretton Woods," he added,
in a reference to the system of fixed but variable exchange rates
established after the Second World War.
Mr. Sarkozy also repeated that France would place the quest for a
new global monetary order at the center of its agenda in its
chairmanship of the Group of Eight next year. The undervaluation of
"certain currencies," Mr. Sarkozy said is bad for fair trade and
competition could result in protectionism. "We will not allow monetary
dumping," he said.
The French leader's comments come as the euro, whose perceived over
valuation has angered most French governments in recent history, hit
its lowest level in nearly a year against the dollar, as fears for the
sustainability of the euro zone increased in the wake of Portugal's
announcement that its budget deficit had topped 9% of gross domestic