Can Sarkozy Save the Global Economy?

With only 18 months to go before he starts his expected re-election bid, one might expect French President Nicolas Sarkozy to be focusing his energy on something a tad closer to home than the rotating leadership of the G20. Yet Sarkozy's enthusiasm in assuming the G20 presidency is running as high as his ambitions to use the post to usher in essential changes to the global economy. That in part reflects Sarkozy's conviction that the enduring global crisis calls for urgent reform to the way the world does business — a belief demonstrated anew on Thursday when he joined German Chancellor Angela Merkel in calling for the European Union's emergency fund to become permanent. But it also speaks to his calculations that a successful stint as president of the G20 next year may be the key to recapturing the French presidency.

Given the protests over his deeply unpopular reform of France's pension system — and plummeting approval ratings that dipped to just above 25% — Sarkozy would be forgiven for wanting to take his mind off the struggle he faces in the runup to France's 2012 presidential election. But when he took over as president of the G20 — a group of nations constituting 85% of global GDP — at a Nov. 12 summit in Korea, Sarkozy wasn't looking for a distraction from his domestic woes. Instead, the French leader gave renewed indication that he plans to push an activist agenda for a world economy battered by recession, crises, and trade conflict. How big are those plans? Sarkozy hopes to get agreement on changing the global monetary system in order to control volatile currency fluctuations. He also wants regulation of energy and commodity markets to limit the influence of speculators, and could possibly seek a new tax on financial transactions.

"We'll assume this presidency with responsibility and realism," Sarkozy said, addressing his fellow leaders in Seoul, adding that he will unveil his exact agenda in January. "The post-crisis G20 must create the basis of the structural reforms we need — and without which we'll lose credibility."

That sounds all well and good, but with the U.S. and China engaged in a currency battle to protect their respective economic interests, can either nation — or most of the other 18 in the group — really be expected to agree to tighter global monetary rules? Similarly, would export-happy Germany be keen on Sarkozy's suggestion to create a permanent G20 secretariat to keep an eye on issues like trade imbalances? And how will the consensus to regulate commodity markets — and, through them, hedge funds — be found in 2011 when fully two years after world finance markets nearly imploded still no significant moves have been made to tame the system, leaving the same actors in that crisis to help bring Ireland to the point of collapse?

The answer, in part, may lie in the fact that Sarkozy even got such proposals on the docket, implying his fellow G20 members realize that knee-jerk resistance to reform is no longer an option. "You can't even hope for change unless you've managed to get it on the agenda for discussion, and Sarkozy's success in doing that raises the chance he may be able to help shape measures once they're under discussion ... and efforts are being made to water them down," says Julius Sen, associate director of LSE Enterprise Ltd. "Countries aren't going to accept all the proposals made, and even those that are adopted will have struck [from them] components that [some] nations refuse to accept. But even incomplete, imperfect movement is movement."

Plus, whatever they end up with can serve as the base to build on. "Whatever Sarkozy can get adopted by G20 countries is positive, because that becomes the framework for future action when new crises arise," says Sen. "For all the talk of scrapping disputed measures that were watered down before passage, repealing them virtually never happens because that requires far more work than working with them. The very history of the European Union and its navigation of crises is evidence of that."

But even if Sarkozy does succeed in forging change as president of the G20, other observers are doubtful that would be enough to reverse his sagging political fortunes in France. "The French expect their presidents to shine on the world stage, but they ignore international performance and vote almost exclusively on the results of domestic policy and leadership — areas in which Sarkozy is hurting badly," says Jean-Marc Lech, co-president of the Ipsos polling agency. A bang-up job at the head of the G20 might not help Sarkozy win re-election, but at least it wouldn't further hurt his chances — and it would win him the credit abroad that he's finding hard to come by at home.