By Roberto Pena
In France, President Nicolas Sarkozy nearly abandoned capitalism during his speech in Toulon on September 24th. Coming from the current EU President, his comments added to the sense of panic, rather than showing resolve and leadership. Those comments may have resonated with socialist sympathizers in France, but left financial analysts scratching their heads. Many are wondering if this is just another French promised reformist, turned apathetic. A few weeks ago he gathered with his European counterparts for a coordinated rescue package, which calls into question the purpose of his Toulon rhetoric. Remind me which side was he on during the '68 protests? He's made a decent effort to spearhead negotiations recently among the EU and US counterparts, but now appears to be stalling the process with his insistence on including energy-related language. If the Kyoto and the EU carbon credit fiascos taught anything is that the US and the EU are nowhere near consensus on climate change.
Italian Prime Minister Berlusconi appeared too fixated on saving Alitalia to notice the looming global meltdown. Now, with the banking system called into question, the rescue of Italy's national airline is on the backburner. Although he's a successful business executive who must understand markets, with his three-thousand Euro suits Berlusconi embodies an air of the backroom-deal and golden parachute that many attribute as the prime causes of the financial crisis. It may be hard for the billionaire to appeal to the unemployed if the crisis gets out of hand in Italy, but the jury is still out, pending the country's financial state in the coming months.
Except for France and the United States, heads of state appear to be benefiting from the crisis. In the UK, Gordon Brown has been revitalized as the technocrat-in-chief. With the interwoven global markets and complexity of some of the securities in question, this is a crisis better suited for Clark Kent than Superman. Who better to handle the situation than the former Chancellor of the Exchequer? Get the man a calculator. David Cameron will have no choice but to go along with what the prime minister drafts up, a short term victory for Brown that may keep the Tories at bay.
One wildcard in the bunch would be Angela Merkel. At the helm of the largest EU economy, Germany's Chancellor stands the most the gain, virtually ensuring her veto-power over any comprehensive regional plan. Unfortunately, her initial response appeared somewhat muddled and uncoordinated. Aside from the initial American economy bashing (she was not alone), she most notably scoffed at Ireland's unilateral guarantee on Irish bank deposits, arguing instead for a coordinated effort. A week later, Germany unveiled its own plan mirroring the Irish response. Her Finance Minister initially balked at the notion of a German-led fund to help bailout Central and Eastern Europe economies, when now such a stabilization fund appears likely in a comprehensive EU plan. Luckily for Merkel, when the EU plan is unveiled she will undoubtedly take center stage and she appears to have learned from her earlier missteps. For Germany's domestic plan, she included restrictions on executive pay and made government assistance conditional on industry reforms. It may be risky as vulnerable banks may opt out, but her take-it-or-leave-it attitude certainly captures public sentiment while placing the onus on Frankfurt to reform.
In Spain, President Luis Zapatero just sat down with Popular Party opposition leader, Manuel Rajoy to iron out the emergency bailout. Earlier in the day, Zapatero had called Rajoy a "hypocrite" for his political grandstanding. The op-ed in El Pais the next day focused on Rajoy's acquiescence rather than the actual bailout plan. In this kind of climate, those who stall risk being seen as obstructionist. And as economies falter, they make incredibly easy targets. It may be too soon to tell who stands to gain the most from the crisis, pending recovery plans, but leaders who delicately balance the demands of voters while aliasing the markets will be the ones to invest in.
[Roberto Pena is a graduate student in the Latin American Studies program at the Johns Hopkins University Paul H. Nitze School of Advanced International Studies (SAIS) Bologna Center in Italy.
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