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28th Mar 2024

Return to growth is a must, Sarkozy and Brown warn

  • Mr Sarkozy: "We cannot afford to have low growth rates over many years." (Photo: The Council of the European Union)

Nicolas Sarkozy and Gordon Brown expressed a "total convergence" of views in their meeting ahead of this week's G8 summit in Italy, with both leaders warning that rising oil prices and declining public investment could spoil the chances for recovery of the world's economy.

Meeting in the French town of Evian on Monday (6 July), Mr Brown, the UK's prime minister, argued that governments must keep spending to return to growth.

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"If we can get growth, if we can get unemployment down, if we can keep interest rates and inflation down, then there is scope to do the things we want to do, and that is to get money to the frontline services," he told journalists after the event, referring to the need to avoid pay and job cuts in the public sector.

His French counterpart, president Nicolas Sarkozy, played the same tune, saying: "Of course we need to combat indebtedness and try to restrain deficit, but we will only achieve that if we restore growth and if we restore our economies to health."

"We cannot afford to have low growth rates over many years," said Mr Sarkozy.

"President Sarkozy, mon ami, you are truly a force of nature," Mr Brown at one point said.

Apart from sufficient public investment, the French president explained that action is needed on the international level to trim down the volatility of oil prices, amid fresh increases over the past months.

Both leaders also stressed that the effective new regulatory measures are needed to prevent the repeat of the financial crisis, which sparked the current global economic downturn, specifically highlighting sanctions against tax havens.

The Organization for Economic Cooperation and Development (OECD), a Paris-based think-tank of the 30 most developed countries, confirmed in June that penalties could be imposed on states that do not conform to the club's new rules on transparency and co-operation.

"The world should be in no doubt that the writing is on the wall for tax havens wherever they may be," said Mr Brown. "So we are calling today for a March 2010 deadline for the introduction of sanctions against tax havens."

The sanctions could include revising investment policies, imposing taxes on funds held in tax havens, or the withdrawal of aid, the UK leader specified. "From today that countdown has begun," he warned.

In April, the OECD put four countries on the tax haven black-list, Costa Rica, Malaysia, the Philippines and Uruguay. Over 30 states such as Switzerland, Luxembourg, Austria, Belgium, Liechtenstein and Monaco were included on a "grey-list" of countries which are willing to cooperate but are deemed not sufficiently transparent.

"Tax havens have shifted from the black list to the grey list, now fiscal co-operation conventions must be signed ...they need to exit the grey list," said Mr Sarkozy, AP reported.

Mr Brown promised to put the new sanctions on the agenda at this week's G8 summit. But the measures are part of a more complex set of international financial regulations which could be agreed by the G20 summit in Pittsburgh in September.

'Swiftly dial back' interest rates, ECB told

Italian central banker Piero Cipollone in his first monetary policy speech since joining the ECB's board in November, said that the bank should be ready to "swiftly dial back our restrictive monetary policy stance."

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