October 7, 2004

Enter Nicolas Sarkozy.  Chirac tried to keep Sarkozy at bay by appointing him Interior Minister in 2002, a thankless job to put it mildly.  But “Sarko”, as he is called, used the position to increase his popularity by cracking down on drunk drivers and pushing for closing of refugee camps.  This spring Chirac had to shake up his cabinet after terrible regional election results, he appointed Sarkozy Finance Minister.

This certainly was not seen as a promotion.  The French economy was in the dumps with little to no hope of recovery.  There goes Sarko’s political career, Chirac must have thought.  But once again Sarkozy proved able to turn a negative into a positive.  In his short reign as Finance Minister he has expanded the French privatization programs, increased consumer confidence, pushed more investment in private equity, and called for major overhauls of the French labor markets.

Also during his reign the French economy has shown some signs of coming back to life.  Consumer confidence is up, GDP is expanding and (as a result) the French budget deficit is starting to decline. 

Sarkozy generally pushes for more liberal (i.e. pro-market) policies.  But he still has some big government, interventionist tendencies.  These include the recent French government bailout of Alstom, pushing Nestle to give into unions, and (the most bizarre move yet) calling on EU governments with low corporate tax rates to raise their taxes or loose structural funds from the EU.

None the less some see Sarkozy as a Hungarian-born, French reformer along the lines of Thatcher and Reagan.  All them were famous for going around the bureaucracy and using their personal appeal to push for market based, if politically unpopular, reforms.  He bears watching.

All the best,