Trader Talk

Sarkozy Prepares France for Big Changes

Look at these quotes out of a speech this afternoon by French President Nicolas Sarkozy:

French President Nicholas Sarkozy
Julien Hekimian | AFP | Getty Images

"For decades, we have spent too much and often badly. This can no longer continue."

"Between reducing pensions and working longer, I pick the second solution. Between earning less and working more, I believe the second solution is better than the first."

There's more: he calls France's 35-hour working week, with retirement at ago 60, a "grave mistake." He says French welfare can't be kept as it is.

On the eurozone, he acknowledged he will be meeting German Chancellor Angela Merkel on Monday, ahead of the EU Summit next week, and that they will be making joint proposals, including changes in treaties that have made the euro zone decision making process awkward and cumbersome.

Sarkozy is clearly in favor of a more all-in approach, saying it's not possible to have a single currency without converging economies. What's that means ? It means the EU needs a more common industrial and agricultural policies. He also boldly asserted that no euro zone country will go into default.

He was more evasive on the politically very touchy issue of allowing the EU to control France's budget, but he said that cutting the deficit will give France more control of its own destiny and that France and all eurozone countries should adopt a balanced budget rule.

Pretty clear he wants the ECB to do more: he "knows" the ECB will act in the face of deflation, a clear signal that France considers the ECB's single mandate of worrying about inflation need not be an issue to further rate cuts and other ECB action.

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