Sarkozy 2 – Europe 0: Photo-Op plus SGP relaxation are fine for France but no success for EU

When the leaders of EU’s four largest member states gathered in Paris over the weekend, several European financial institutions had just been on fire. This should have given the meeting some urgency in setting up at the very least some task force to deal with systemic risk and cross-border cooperation. Indeed, last weeks events have been, if anything, a positive surprise with respect to the extent and swiftness of cooperation across national borders. (But somehow I cannot help wondering if the praise in the relevant cases has more to do with the pragmatist nature of BeNeLux countries than anything else).

The Paris summit brought actually very few results. On the main topic, shoring up Europe’s banking system, nothing materially changes as every nation will do what it deems best. O.k. there will be some informal exchange, but that is about it. So unintended consequences such a flight of British bank deposits to the Republic of Ireland after the latter announced a general guarantee will remain the name of the game within Europe’s financial markets. And so will ad-hoc case-by-case solutions when a major financial institution runs into trouble.

So Europe scores nil on this weekend’s summit.

By contrast, French president Sarkozy not only gets his photo-opportunity with his peers but also some pre-announced temporary relaxation of the growth and stability pact. Well, in the end his fiscal plans were to clash with the deficit ceiling anyway. That’s a nice windfall gain.

So Sarkozy scores twice on this weekend’s summit.But petty games and symbolism might not suffice to prevent further unpleasant surprises.