G-20 Discord: Merkel and Sarkozy Sharpen Their Tone in London

By in London

In the morning, Barack Obama and Gordon Brown were conciliatory. In the evening, Nicolas Sarkozy and Angela Merkel went on the war path. The two said they would accept no compromises when it came to financial market regulation.

Such an impolitic press conference hasn't been seen at an international summit for a long time. From the very first moment, both German Chancellor Angela Merkel and French President Nicolas Sarkozy made it clear that they would accept no compromises at the G-20 meeting in London.

French President Nicolas Sarkozy and German Chancellor Angela Merkel took center stage in London on Wednesday evening.
AFP

French President Nicolas Sarkozy and German Chancellor Angela Merkel took center stage in London on Wednesday evening.

"The time of useless summits has passed," intoned Sarkozy. When it comes to the regulation of the financial markets, he said, there will be no room for negotiation. Merkel seconded her French counterpart, saying that "nothing can be swept under the rug." For Germany and France, she said, regulation is not up for debate. "Whoever doesn't understand that is paving the way to the next crisis," she warned.

Sarkozy had already made headlines in recent days with his threat to leave the summit early should his wish list not be adopted. On Wednesday evening in London, Merkel threw her weight behind him. It is a "decisive summit for the future of the world," she said. The German chancellor is concerned that, if a consensus isn't reached in London, it could be years before an agreement is hammered out. As such, she pledged that she would fight hard, right down to the details.

The abrasive appearance of the German-French duo on the eve of the G-20 summit was nothing less than a provocation. The British and the Americans, said one member of the German delegation, were "extremely concerned" about this press conference. And it turned out they had reason to be. It was a barely veiled challenge issued by the continental Europeans to the US and Great Britain.

It was particularly notable for its contrast to the tone adopted by US President Barack Obama and British Prime Minister Gordon Brown earlier in the day. The two seemed intent on de-escalation after weeks of barbs being fired across the Atlantic. Indeed, Obama called reports about differences of opinion between the US and Europe "vastly overstated." He insisted that, in essence, everyone agreed on how to confront the crisis -- when it came to both stimulating the economy and increasing the regulation of financial markets. Berlin too had adopted a conciliatory tone.

On Wednesday evening, though, that changed. But why did Merkel suddenly go on the attack?

"This is about the weighting of the message of this summit," the chancellor explained. The German government feels that tighter regulations are given short shrift in the draft of the closing statement the British government presented to participants. In some areas it remains too vague -- on issues like tax havens, hedge funds and ratings agencies, for example. And in others Merkel feels it is too concrete -- like on the issue of further economic stimulus.

Germany and France want to see the pledges that were made at the G-20 summit in Washington in November be implemented, Merkel said. At the time, an action plan was agreed to that would see improved oversight of financial markets. "That cannot just be left in general terms," Merkel said; instead, "very concrete considerations" are necessary. Sarkozy added that there is no time left for "grand speeches," an apparent reference to Brown and Obama. "The decision must be made today and tomorrow. The day after is too late."

In the existing draft of the statement, the details about regulating financial markets are hidden in an appendix. And German government sources already say that lobbyists in London and New York are working hard to water down the language of the international consensus.

But this concern alone wouldn't be enough to risk a major breech of summit etiquette. With their uncompromising approach, Merkel and Sarkozy were ultimately indicating that they wanted to put their stamp on the summit. Often, though, such a flexing of muscles on the international stage backfires, generating resistance from the other participants.

Merkel and Sarkozy went ahead anyway in the knowledge that they hold the better cards. Their main adversaries, Brown and Obama, have more to lose. The host has tied his political future to the summit, and Obama can't begin his first trip to Europe as president with controversy. That, at least, is what Merkel and Sarkozy are banking on. They're also willing to hazard the consequences of collateral damage. Indeed, the myth that there are no fronts at this summit has been dismissed for good.

Brown had already tried in the morning to contain the imminent Sarkozy disaster. He called for tighter regulation as the first of five goals that the summit must reach. But it didn't work. Merkel and Sarkozy made their ill-humor known before going to the official start of the G-20 summit, the opening reception at Buckingham Palace.

The duo is taking a lot of risks with their aggressive rhetoric. One of those is that the demand for more economic stimulus measures from France and Germany will now become louder -- forcing Merkel to begin horse-trading after all.

To independent observers, the German critique of the closing statement seems strangely stubborn. In particular, the total rejection of further economic stimulus seems "very defensive," said Henrik Enderlein, a professor of political economics at the Hertie School of Governance in Berlin.

"They don't seem to want any mention of economic stimulus measures," said Enderlein, explaining that, if necessary, Berlin would prefer a vague statement of intention. The reason, said the professor, is the upcoming national elections: "The chancellor doesn't want to commit herself to anything in the summit document that could be held against her later during the election campaign."

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