...

Sarkozy seeks culprits for global market crisis

Other News Materials 23 September 2008 20:21 (UTC +04:00)

French President Nicolas Sarkozy demanded on Tuesday that those who caused the global financial market crisis be punished, feeding off popular frustration with the boom-bust culture of banking.

However, he gave no indication of who should be targeted, how they might be made to answer, or why political leaders in Europe and the United States did not act earlier, guardian.co.uk reported.

"Today, millions of people across the world fear for their savings, for their apartment, for the funds they have put in banks. It is our duty to give them clear answers," the French leader said during a visit to New York.

"Who is responsible for this disaster? May those who are responsible be punished and held accountable."

It was Sarkozy's first public declaration on a crisis which has raged for more than a week, forcing the U.S. authorities to rescue several financial institutions and commit $700 billion to buying up the contaminated assets behind the crisis.

Other European leaders, from Britain to Germany, have voiced irritation over the mayhem, which was not of their making and dents the confidence that economic prosperity depends on.

But analysts and market experts doubted whether anyone would be held to account because no one apparently broke any rules.

"The reality of the situation is that no heads can roll," said Howard Wheeldon, senior strategist of brokers BGC Partners in London. "The problem was that we believed we were being regulated, but those regulations did not have teeth."

PRESSURE TO BE SEEN TO ACT

That will be little comfort to households which have spent the past year dealing with soaring oil and food prices only to see stock prices fall and one cataclysmic news headline after another since Wall Street started to crumble.

Sarkozy and Germany's chancellor, Angela Merkel, have both complained that their calls last year for tighter regulation of the markets were shunted aside by the United States and Britain which were eager to protect their financial service sectors.

They are not the only ones keen to show that politicians are on the case and determined to see things change.

"The crisis signifies the final decline of a system based on greed, irresponsible risks and perverse incentives," Dutch Finance Minister Wouter Bos said.

Ironically, scandals close to home have shown not only that oversight in continental Europe fails at times, but also that apportioning blame is never easy.

Earlier this year, Sarkozy demanded the resignation of Daniel Bouton, the head of French bank Societe Generale, after a trader there made unauthorised deals that cost 4.9 billion euros ($7.24 billion) to unwind and should have been detected earlier.

Despite the presidential rap, Bouton remains chairman.

British Prime Minister Gordon Brown started the blame game rolling at the weekend when he described the bonus culture prevalent in high finance as "perverse" and "unacceptable".

"There's been a great deal of irresponsibility," Brown told BBC television, looking to walk clear of the market wreckage despite the fact that he was finance minister for most of the past decade when the foundations of the crisis were laid.

Brown was not quite so vocal when times were good and he was finance minister of a country whose capital rivals New York as leading financial centre of the world.

"It is very rich coming from Gordon Brown," said Wheeldon.

German politicians may find it hard to say that they got it right, even if Germany, France and Italy had little to do with the financial engineering that caused the problem.

In Germany, business lender IKB came close to insolvency after investing in assets linked to U.S. subprime mortgages, and the cost of repeated rescue attempts spiralled towards 10 billion euros.

"Not a single person was held accountable for this disaster at IKB and here we're talking 10 billion," said Daniel Gros, director of the Centre for European Policy Studies, a Brussels-based think-tank.

He urged politicians not to get distracted by a witchhunt.

"I don't know why politicians want to waste precious time at this point when there's so many other important things to do."

(Additonal reporting by Niclas Mika in Amsterdam, Francois Murphy in Paris and Emmanuel Jarry in New York; editing by Mark Trevelyan)

Latest

Latest