Sarkozy to push for tax on hedge funds

Nicolas Sarkozy will push for a European tax on “speculative movements” by financial groups, such as hedge funds, if he wins this year’s French presidential elections.

The centre-right candidate to replace Jacques Chirac said in comments published by Wednesday’s Les Echos, the Financial Times’s sister newspaper, that he aimed to “raise moral standards and improve security in financial capitalism”.

Mr Sarkozy spent much of the interview outlining plans to cut taxes, reduce state spending and make France work longer. He also bashed the tax-and-spend proposals from Ségolène Royal, his socialist rival, as “a return to the Jospin years”, referring to the last socialist prime minister.

But his plan to tax financial flows is likely to dismay US and UK financial groups, as well as parts of the French business community, which largely prefers him to Ms Royal.

“We did not create the euro to have capitalism without ethics or morals. I am extremely worried about speculative movements,” he said. “Who can tolerate a hedge fund buying a company with debts, firing 25 per cent of staff and then reimbursing them by selling it in pieces? Not me.

“I want to make France the country that rewards wealth creation, but which also knows how to hit predators.” His comments echo the traditional Gaullist suspicion of capitalism and financial investors, for which Mr Chirac has become well known.

Mr Sarkozy’s attack on speculative finance mirrors the views of some business leaders. Claude Bébéar, chairman of insurer Axa, France’s biggest institutional investor, yesterday pilloried the “dictatorship of the market” and the “short-term interests” of hedge funds.

Mr Sarkozy is one of the few French politicians to call himself an economic liberal, making him popular with US and UK officials. Yet his record as finance minister was notably dirigiste. He intervened to save Alstom, the engineering group, from bankruptcy and brokered an all-French merger of Aventis and Sanofi to avert a takeover by Switzerland’s Novartis.

Mr Sarkozy made some more business-friendly noises in the interview, promising to cut the French tax burden by €68bn ($89bn, £46bn) over 10 years and make reform of the state “a great presidential worksite” if elected in April’s ballot.

Slamming Ms Royal’s 100-point manifesto, unveiled on Sunday, he said: “The values Ms Royal puts forward are mollycoddling, egalitarianism and a levelling out [of society] . . . Where is the evolution of French socialism in the image of other European socialisms?”

Both Ms Royal and Mr Sarkozy have been criticised for being vague on the cost of their manifestos. Mr Sarkozy responded: “My project represents €30bn in five years, of which €15bn comes from reduced taxes and charges.”

But he drew a contrast between his programme and Ms Royal’s by saying: “On one side is investment and on the other is assistance.” He announced plans to reallocate 5 per cent of the €590bn of flexible public spending.

Mr Sarkozy admitted he was watching Germany’s three percentage point increase in VAT with interest. “Everyone said it would be a disaster. But there have not been price rises or recession. I will study this option.”

He promised to merge France’s separate unemployment benefit agency and job centre into a single structure, such as exists in the UK. Further resources, he said, could come from reducing the state’s stake in EDF, the electricity utility.

Read the full transcript of Nicolas Sarkozy’s interview with Les Echos