US embassy cable - 05PARIS5335

C O N F I D E N T I A L SECTION 01 OF 03 PARIS 005335 
 
SIPDIS 
 
STATE FOR EUR, DRL, AND EB 
COMMERCE FOR ITA 
LABOR FOR ILAB 
NSC FOR TRACY MCKIBBEN 
 
E.O. 12958: DECL: 08/04/2015 
TAGS: PREL, ECON, EFIN, ELAB, PGOV, FR 
SUBJECT: ALLAN HUBBARD'S CALL ON INTERIOR MINISTER SARKOZY 
 
REF: PARIS 5232 
 
Classified By: Ambassador Craig R. Stapleton for reasons 1.4 (b) and (d 
). 
 
 1.  (C) SUMMARY.  Ambassador Stapleton and National Economic 
Council Director Allan Hubbard met with Interior Minister 
Nicolas Sarkozy on August 1.  Sarkozy expressed his 
admiration for President Bush and said he looked forward to 
the opportunity to tackle France's economic and social 
problems with the same directness for which the President is 
justly famous.  Sarkozy confirmed that he would be running 
for President of France in 2007.  He said his own struggle to 
rise to high office, as the son of immigrants challenging 
entrenched elites, in part explained his deep admiration for 
America's values.  He said he would stress opportunity and 
making a "deep break with the past" -- by proposing 
significant change to France's social model -- in his 2007 
campaign.  On economic issues, Sarkozy reprised many of his 
now familiar policy themes: France's economic model holds 
back growth; people need to work more and be rewarded for 
doing so; and people need to be told the truth about the 
economic situation.  He was upbeat 
about France's future if the country seized the opportunity 
that reforms could bring.  He also tossed out a few of the 
"policy zingers" for which he is well known, notably "The 
European Central Bank confuses a strong currency with a 
strong economy," and "France needs to do what Reagan did in 
the U.S., Thatcher in Britain, and Gonzales in Spain."  End 
Summary. 
 
2.  (U) Ambassador Stapleton and Allan Hubbard, Director of 
the National Economic Council, met with France's Minister of 
Interior, Nicolas Sarkozy on 1 August.  Sarkozy is also the 
president of the Union for a Popular Movement (UMP) party, a 
coalition of center-right parties founded by President Chirac 
in 2002.  The meeting took place in Sarkozy's office at the 
Ministry of the Interior and was also attended by Sarkozy 
Chief of Staff Claude Gueant and Interior Ministry Staffer 
Cederic Goubet.  Embassy Econ Counselor, Poloff and Economic 
Analyst (as interpreter) accompanied Mr. Hubbard and 
Ambassador Stapleton. 
 
ADMIRATION FOR PRESIDENT BUSH 
----------------------------- 
3.  (C) Sarkozy expressed his admiration for President Bush. 
Sarkozy said that, like the President, he too was committed 
to keeping his word and to dealing honestly with the real 
problems of the country, "unlike the rest of those 
politicians."  Throughout the hour-long meeting, Sarkozy 
returned again and again to the importance of leveling with 
people.  He illustrated his point by saying the "French 
people have to be told the truth -- and they want to hear 
it."  He added that most politicians, and specifically 
President Chirac, just keep stringing the people along with 
their "constant tergiversating."  Economic Council Director 
Hubbard's presentation of the President's direct and 
principled tackling of America's major domestic challenges 
(taxes, social security, education), drew the high compliment 
from Sarkozy that he too would like to tackle the same 
problems, in the same way, for France. 
 
DISAGREEING WITH VERSUS UNDERCUTTING THE U.S. 
--------------------------------------------- 
4.  (C) Sarkozy lamented the troubled state of U.S.-France 
relations during recent years.  He drew a sharp distinction 
between disagreeing with friends and undercutting them.  He 
said, "we should always be able to disagree."  Calling it 
something he "would never do", he cited President Chirac's, 
and then-Foreign Minister de Villepin's, use of France's 
Security Council veto against the U.S. in February 2002 as an 
unjustifiable and excessive reaction to a difference of 
views.  He added that he would have advised the U.S. not to 
undertake the invasion and occupation of Iraq -- but that 
that didn't prevent him from "feeling it personally when 
American soldiers die in combat."  He proudly pointed out 
how, at the height of anti-American feeling and anti-U.S. 
demonstrations (contemporaneous to Sarkozy's first stint as 
Minister of the Interior (2002 - 2004)), he took it as a 
personal responsibility to see to it that "no U.S. Embassy or 
Consulate was so much as touched" by demonstrators. 
 
IDENTIFYING WITH AMERICA'S VALUES 
--------------------------------- 
5.  (C) "They call me 'Sarkozy the American,'" he said, "they 
consider it an insult, but I take it as a compliment." 
Sarkozy stressed how much he "recognized himself" in 
America's values.  He recalled how as a boy, he told his 
father that he wanted to grow up to be president.  He said 
his Hungarian-born father retorted, "In that case, go to 
America -- because with a name like Sarkozy, you'll never 
make it here."  Proving that wrong, Sarkozy said, was a 
touchstone for his efforts both to succeed and to transform 
France into a place where "outsiders" like him could also 
enjoy opportunity untrammeled by prejudice.  Comment:  Very 
much unlike nearly all other French political figures, 
Sarkozy is viscerally pro-American.  For most of his peers 
the U.S. is a sometimes reviled or admired, but decidedly 
foreign, other.  Sarkozy identifies with America; he sees his 
own rise in the world as reflecting an American-like saga. 
End Comment. 
 
 
FIGHTING FRANCE'S ELITE 
----------------------- 
6.  (C) Sarkozy pointed to his own political career as an 
example of both his success and the difficulty of achieving 
it.  "I'm not a member of the elite...I'm someone who wants 
to speak for the France that gets up every morning and 
works," he said, as he recalled his own rise from "knowing 
nobody and beginning as a simple party supporter, and 
climbing every step in the ladder" to his current bid for the 
presidency.  With some vehemence, Sarkozy insisted on his 
having had to "challenge those stronger than me" every step 
of way. 
 
CONFIRMING HE WILL RUN 
---------------------- 
7.  (C) Sarkozy confirmed his intention to run for president 
to Ambassador Stapleton and NEC Director Hubbard, saying, "I 
am going to be a candidate in 2007".  Outlining his campaign 
strategy, Sarkozy said, "we are going to propose change to 
the French people."  "I'm convinced that it can work...people 
want to believe they can succeed."  Sarkozy then touched on 
many of his specific proposals for providing more opportunity 
for the able and more support for the disadvantaged -- tax 
cuts, labor law reform, affirmative action, immigration 
reform, and monetary policy that "recognizes that the 
currency is an instrument for supporting a strong economy." 
 
RECALLING REAGAN, THATCHER AND GONZALES 
--------------------------------------- 
8.  (C) On economic affairs, Sarkozy repeated his 
often-stated assertion that the French economic model is 
"bad."  France needs to do what Spain, the UK and other 
successful countries have done over the past twenty years; 
take the best of what they have done and adopt those policies 
in France.  In response to Mr. Hubbard's question on what 
Sarkozy's economic vision for France was, Sarkozy said that 
the French people have to understand that they need to work 
more and that the Government must make it more profitable for 
people who do so.  He said that France needed to a go through 
a period similar to the U.S. under Reagan, the UK under 
Thatcher, and Spain under Gonzalez.  "France is not an old 
country," he said, "but right now it's acting like one." 
 
INCENTIVES FOR TAKING INITIATIVE 
-------------------------------- 
9.  (C) Sarkozy explained his theory that unemployment 
benefits should be higher than they currently are for people 
immediately after they are laid off.  However they should 
quickly phase out to provide an incentive for people to look 
for work.  Unemployed people should be required to look for 
work; now they are not required to.  Echoing comments made by 
Finance Minister Breton, Sarkozy said, "people are ready for 
the politics of truth."  He added that his directly expressed 
assessments of France's economic problems and his insistent 
advocacy of work, innovation and entrepreneurship in fact 
contribute to his popularity.  "Some people told me never to 
say such things, people will hate you; clearly they don't 
hate me," he observed. 
 
OVER-VALUED EURO AND NO ALAN GREENSPAN 
-------------------------------------- 
10  (C) On the deficit, Sarkozy said that for 25 years France 
has been living beyond its means.  Now it is paying the price 
for that.  He said that the U.S. had two advantages that 
France did not have: "Greenspan and the dollar."  He said 
that France was suffering from no longer having control of 
its own currency and observed that European Central Bank 
(ECB) president Trichet was pursuing exactly the wrong 
policies; "he confuses a strong currency with a strong 
economy."  Europe needed a pro-growth ECB, not one focused on 
fighting inflation only.  The U.S., he observed, "has often 
had its strongest economy when the dollar was at its 
weakest."  Turning to Chairman Greenspan, Sarkozy said, "he 
is a genius. A genius.  He has pursued exactly the right 
policies." 
 
FRANCE'S ECONOMIC CHALLENGES 
---------------------------- 
11.  (C) Returning to his priorities for France, Sarkozy 
noted that France's biggest challenges were outsourcing, a 
lagging research sector, savings that are "too static and 
don't really help move the economy," and a lack of profitable 
mid-size companies; "we have lots of big ones and lots of 
really small ones, but few in between."  He sees natural 
strengths for France in the health, agriculture and food, 
transportation, communication and nuclear energy sectors. 
 
WORKING TOGETHER AT THE WTO 
--------------------------- 
12.  (C) Responding to Mr. Hubbard's observation on the need 
for the Doha trade round to move forward this autumn, Sarkozy 
agreed, and noted that the EU needed to reach a better 
understanding with the U.S. on agricultural issues.  He said 
that U.S. and EU officials were talking but prescribed much 
more intensive discussion so that a common understanding 
could be reached.  If that happened, he believed the upcoming 
Hong Kong ministerial could be a success. 
 
COMMENT 
------- 
13.  (C) For many years, Nicolas Sarkozy has been France's 
most popular politician.  Current polls show his approval 
ratings holding steady at around 60 percent, and defeating 
any probable opponent in 2007.  By experience and conviction 
-- his experience as interior minister and his "liberal," 
free-market oriented convictions -- he seems particularly 
well-suited to lead France in meeting the key challenges it 
now faces: security in this era of global terrorism and 
prosperity in this era of adapting to economic globalization. 
 In addition, Sarkozy's deep identification with American 
values -- opportunity, initiative, competition, society that 
sustains individual liberty as much as it supports national 
power, make him France's best hope for catalyzing the shift 
in social values that the French need to make if they are to 
take full advantage of globalization. 
 
COMMENT CONTINUED 
----------------- 
14. (C) Sarkozy's vision for France is a powerful one, and, 
as his popularity reflects, it resonates with a big part of 
the electorate.  However, resistance to social change is 
particularly strong in France.  Attachment to the benefits 
and advantages that most of them receive, in one way of 
another, from the state -- the substance of the "French 
social model" -- is very strong among ordinary French people. 
 Sarkozy's popularity may be a reflection of change the 
French would like to make, but are too conservative to in 
fact undertake.  End Comment. 
STAPLETON