When Free Markets Just Don't Work…

The Franco-German Offensive: Chancellor Merkel and President Sarkozy want to quickly unite Europe behind a common way to regulate financial markets.

German Chancellor Angela Merkel and French President Nicolas Sarkozy have insisted the European Union take a leading role in fighting the financial crisis. “The unregulated free market didn’t work,” they wrote in a joint-article published in Welt am Sonntag and the French Journal du Dimanche. What’s needed, they wrote, is a responsible market economy. They called upon the European Union to take concrete steps to ensure “actual European regulation of the financial sector.”

“Regarding hedge funds, tax havens and compensation for executives and managers in the financial sector, we want Europe to be an example to others,” Merkel and Sarkozy explained, while also calling for a change in accounting standards. They added that an adequate supply of credit for businesses was the order of the day. The two heads of government announced that they would push for the “necessary measures” towards that goal at the next European summit in June.

Merkel and Sarkozy also referred to a commitment to discussions in the near future concerning the liberalization of world trade. “We want fair trade on a reciprocal basis,” they emphasized.

An effective and efficient system has to be put into place within the World Trade Organization (WTO) in order to oversee government support in the private sector and to prevent competitive distortions resulting from the influence of excessive third party government interventions. “As long as such a system is lacking, we must consider adopting provisional European solutions,” they wrote.

The so-called Doha round of negotiations that began seven years ago are intended, above all, to help poorer countries gain access to world markets. The discussions broke down last year over disagreements concerning agricultural tariffs.