G is for Grand: Presidents Obama and Sarkozy Talk G-8/G-20 Grand Strategy

In his second Oval Office visit in two years, President Nicolas Sarkozy of France will meet with President Barack Obama on Monday to discuss this year’s upcoming G-8 and G-20 Summits. Over a working lunch, the presidents will also have an opportunity to discuss other pressing international issues, such as Iran. France chairs both the G-20 and G-8 this year, and Sarkozy’s meeting with Obama is part of a series of consultations he has held recently with G-20 leaders and follows earlier meetings with President Hu Jintao of China and Prime Minister Manmohan Singh of India. The French president will shortly announce his official agenda for both the G-8 and G-20, after previously outlining an ambitious wish list of objectives last summer.

Q1: What does President Sarkozy hope to achieve in his meeting with President Obama?

A1: President Sarkozy will seek President Obama’s support of his energetic and overly ambitious G-20 agenda, particularly initiating international talks to expand the basket of international currencies, known as Special Drawing Rights (SDRs), to replace the U.S. dollar as the de facto global currency reserve in order to minimize significant fluctuations in global exchange rates. Sarkozy is also keen to enhance regulation of commodity markets, particularly in the energy and agricultural sectors, to prevent excessive price volatility. Finally, Sarkozy will seek Obama’s support to reform the IMF, institute a new banking regulatory system, and expand the G-20’s portfolio to include development and financing adaptation to climate change. For the G-8, it is likely that Sarkozy will seek an enlargement of this agenda as well, with a new focus on cyber security. He will also wish to highlight the G-8’s important work in development, particularly in Africa, with a renewed focus on implementing outstanding G-8 development commitments.

Q2: Will President Obama agree to President Sarkozy’s G-20 vision and agenda?

A2: Both leaders agree that the G-20, the only informal group that gathers Western developed powers and major emerging economies, is the principal forum for international economic cooperation today. But President Obama will not agree to talks that would challenge the dollar’s supremacy as the global reserve currency of choice or substantially reform the global financial system. Moreover, there is growing recognition that the G-20 is not performing as well as it did in the initial months following the global economic recession. The G-20 is struggling to find its future place and purpose in a noncrisis environment (although the global economy is far from being out of the woods yet, as Europe can attest).

Believing that this is a “make-or-break” year for the G-20, President Sarkozy is attempting to carve out a much greater role for the group and seeks to strengthen and institutionalize its structure so that it can perform these anticipated, expanded duties. His vision seems out of sync, however, with the G-20’s non-European members, who are growing increasingly reluctant to define a more precise and leading role in areas such as reform of the UN Security Council or in the development arena.

Ironically, the United States and Europe themselves have not yet developed a transatlantic consensus on specific global economic policies and strongly differ on the need for further economic stimulus (Europeans have harshly criticized U.S. quantitative easing policy, which they argue is competitive devaluation) or the requirement to dramatically reduce government spending (which U.S. policymakers believe negatively affects economic growth and prolongs recession). There are also significantly divergent views on how best to regulate the global banking and financial sectors.

Believing that Europe’s economic woes have been deepened by unprincipled market speculators, France is determined to regulate the marketplace and ensure that the future burden of failure is placed on market players (by, for example, levying a special tax on financial transactions to create a bailout fund or requiring bond investors to share the risk of investing) rather than on governments.

Q3: Since France chairs both the G-8 and G-20, will President Obama attend both summits in France this year?

A3: As his popularity in France continues to sag, President Sarkozy is eager to boost his image as a key international player by hosting President Obama and other international leaders twice this year, for the G-8 Summit and the G-20 Summit. Sarkozy will strongly encourage Obama to attend both events as the absence of the U.S. president, particularly at a G-8 Summit, would considerably weaken and diminish the organization at a time when America’s older allies, Europe and Japan, are feeling increasingly uncertain as to how or whether the United States values or appreciates their opinions and participation in these meetings.

Heather A. Conley is a senior fellow and director of the Europe Program at the Center for Strategic and International Studies in Washington, D.C.

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