This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 03 PARIS 005335

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E.O. 12958: DECL: 08/04/2015

TAGS: PREL ECON EFIN ELAB PGOV FR

SUBJECT: ALLAN HUBBARD'S CALL ON INTERIOR MINISTER SARKOZY

REF: PARIS 5232

Classified By: Ambassador Craig R. Stapleton for reasons 1.4 (b) and (d

).

¶1.  (C) SUMMARY.  Ambassador Stapleton and National Economic

Council Director Allan Hubbard met with Interior Minister

Nicolas Sarkozy on August 1.  Sarkozy expressed his

admiration for President Bush and said he looked forward to

the opportunity to tackle France's economic and social

problems with the same directness for which the President is

justly famous.  Sarkozy confirmed that he would be running

for President of France in 2007.  He said his own struggle to

rise to high office, as the son of immigrants challenging

entrenched elites, in part explained his deep admiration for

America's values.  He said he would stress opportunity and

making a "deep break with the past" -- by proposing

significant change to France's social model -- in his 2007

campaign.  On economic issues, Sarkozy reprised many of his

now familiar policy themes: France's economic model holds

back growth; people need to work more and be rewarded for

doing so; and people need to be told the truth about the

economic situation.  He was upbeat

about France's future if the country seized the opportunity

that reforms could bring.  He also tossed out a few of the

"policy zingers" for which he is well known, notably "The

European Central Bank confuses a strong currency with a

strong economy," and "France needs to do what Reagan did in

the U.S., Thatcher in Britain, and Gonzales in Spain."  End

Summary.

¶2.  (U) Ambassador Stapleton and Allan Hubbard, Director of

the National Economic Council, met with France's Minister of

Interior, Nicolas Sarkozy on 1 August.  Sarkozy is also the

president of the Union for a Popular Movement (UMP) party, a

coalition of center-right parties founded by President Chirac

in 2002.  The meeting took place in Sarkozy's office at the

Ministry of the Interior and was also attended by Sarkozy

Chief of Staff Claude Gueant and Interior Ministry Staffer

Cederic Goubet.  Embassy Econ Counselor, Poloff and Economic

Analyst (as interpreter) accompanied Mr. Hubbard and

Ambassador Stapleton.

ADMIRATION FOR PRESIDENT BUSH

-----------------------------

¶3.  (C) Sarkozy expressed his admiration for President Bush.

Sarkozy said that, like the President, he too was committed

to keeping his word and to dealing honestly with the real

problems of the country, "unlike the rest of those

politicians."  Throughout the hour-long meeting, Sarkozy

returned again and again to the importance of leveling with

people.  He illustrated his point by saying the "French

people have to be told the truth -- and they want to hear

it."  He added that most politicians, and specifically

President Chirac, just keep stringing the people along with

their "constant tergiversating."  Economic Council Director

Hubbard's presentation of the President's direct and

principled tackling of America's major domestic challenges

(taxes, social security, education), drew the high compliment

from Sarkozy that he too would like to tackle the same

problems, in the same way, for France.

DISAGREEING WITH VERSUS UNDERCUTTING THE U.S.

---------------------------------------------

¶4.  (C) Sarkozy lamented the troubled state of U.S.-France

relations during recent years.  He drew a sharp distinction

between disagreeing with friends and undercutting them.  He

said, "we should always be able to disagree."  Calling it

something he "would never do", he cited President Chirac's,

and then-Foreign Minister de Villepin's, use of France's

Security Council veto against the U.S. in February 2002 as an

unjustifiable and excessive reaction to a difference of

views.  He added that he would have advised the U.S. not to

undertake the invasion and occupation of Iraq -- but that

that didn't prevent him from "feeling it personally when

American soldiers die in combat."  He proudly pointed out

how, at the height of anti-American feeling and anti-U.S.

demonstrations (contemporaneous to Sarkozy's first stint as

Minister of the Interior (2002 - 2004)), he took it as a

personal responsibility to see to it that "no U.S. Embassy or

Consulate was so much as touched" by demonstrators.

IDENTIFYING WITH AMERICA'S VALUES

---------------------------------

¶5.  (C) "They call me 'Sarkozy the American,'" he said, "they

consider it an insult, but I take it as a compliment."

Sarkozy stressed how much he "recognized himself" in

America's values.  He recalled how as a boy, he told his

father that he wanted to grow up to be president.  He said

his Hungarian-born father retorted, "In that case, go to

America -- because with a name like Sarkozy, you'll never

make it here."  Proving that wrong, Sarkozy said, was a

touchstone for his efforts both to succeed and to transform

France into a place where "outsiders" like him could also

enjoy opportunity untrammeled by prejudice.  Comment:  Very

much unlike nearly all other French political figures,

Sarkozy is viscerally pro-American.  For most of his peers

the U.S. is a sometimes reviled or admired, but decidedly

foreign, other.  Sarkozy identifies with America; he sees his

own rise in the world as reflecting an American-like saga.

End Comment.

FIGHTING FRANCE'S ELITE

-----------------------

¶6.  (C) Sarkozy pointed to his own political career as an

example of both his success and the difficulty of achieving

it.  "I'm not a member of the elite...I'm someone who wants

to speak for the France that gets up every morning and

works," he said, as he recalled his own rise from "knowing

nobody and beginning as a simple party supporter, and

climbing every step in the ladder" to his current bid for the

presidency.  With some vehemence, Sarkozy insisted on his

having had to "challenge those stronger than me" every step

of way.

CONFIRMING HE WILL RUN

----------------------

¶7.  (C) Sarkozy confirmed his intention to run for president

to Ambassador Stapleton and NEC Director Hubbard, saying, "I

am going to be a candidate in 2007".  Outlining his campaign

strategy, Sarkozy said, "we are going to propose change to

the French people."  "I'm convinced that it can work...people

want to believe they can succeed."  Sarkozy then touched on

many of his specific proposals for providing more opportunity

for the able and more support for the disadvantaged -- tax

cuts, labor law reform, affirmative action, immigration

reform, and monetary policy that "recognizes that the

currency is an instrument for supporting a strong economy."

RECALLING REAGAN, THATCHER AND GONZALES

---------------------------------------

¶8.  (C) On economic affairs, Sarkozy repeated his

often-stated assertion that the French economic model is

"bad."  France needs to do what Spain, the UK and other

successful countries have done over the past twenty years;

take the best of what they have done and adopt those policies

in France.  In response to Mr. Hubbard's question on what

Sarkozy's economic vision for France was, Sarkozy said that

the French people have to understand that they need to work

more and that the Government must make it more profitable for

people who do so.  He said that France needed to a go through

a period similar to the U.S. under Reagan, the UK under

Thatcher, and Spain under Gonzalez.  "France is not an old

country," he said, "but right now it's acting like one."

INCENTIVES FOR TAKING INITIATIVE

--------------------------------

¶9.  (C) Sarkozy explained his theory that unemployment

benefits should be higher than they currently are for people

immediately after they are laid off.  However they should

quickly phase out to provide an incentive for people to look

for work.  Unemployed people should be required to look for

work; now they are not required to.  Echoing comments made by

Finance Minister Breton, Sarkozy said, "people are ready for

the politics of truth."  He added that his directly expressed

assessments of France's economic problems and his insistent

advocacy of work, innovation and entrepreneurship in fact

contribute to his popularity.  "Some people told me never to

say such things, people will hate you; clearly they don't

hate me," he observed.

OVER-VALUED EURO AND NO ALAN GREENSPAN

--------------------------------------

10  (C) On the deficit, Sarkozy said that for 25 years France

has been living beyond its means.  Now it is paying the price

for that.  He said that the U.S. had two advantages that

France did not have: "Greenspan and the dollar."  He said

that France was suffering from no longer having control of

its own currency and observed that European Central Bank

(ECB) president Trichet was pursuing exactly the wrong

policies; "he confuses a strong currency with a strong

economy."  Europe needed a pro-growth ECB, not one focused on

fighting inflation only.  The U.S., he observed, "has often

had its strongest economy when the dollar was at its

weakest."  Turning to Chairman Greenspan, Sarkozy said, "he

is a genius. A genius.  He has pursued exactly the right

policies."

FRANCE'S ECONOMIC CHALLENGES

----------------------------

¶11.  (C) Returning to his priorities for France, Sarkozy

noted that France's biggest challenges were outsourcing, a

lagging research sector, savings that are "too static and

don't really help move the economy," and a lack of profitable

mid-size companies; "we have lots of big ones and lots of

really small ones, but few in between."  He sees natural

strengths for France in the health, agriculture and food,

transportation, communication and nuclear energy sectors.

WORKING TOGETHER AT THE WTO

---------------------------

¶12.  (C) Responding to Mr. Hubbard's observation on the need

for the Doha trade round to move forward this autumn, Sarkozy

agreed, and noted that the EU needed to reach a better

understanding with the U.S. on agricultural issues.  He said

that U.S. and EU officials were talking but prescribed much

more intensive discussion so that a common understanding

could be reached.  If that happened, he believed the upcoming

Hong Kong ministerial could be a success.

COMMENT

-------

¶13.  (C) For many years, Nicolas Sarkozy has been France's

most popular politician.  Current polls show his approval

ratings holding steady at around 60 percent, and defeating

any probable opponent in 2007.  By experience and conviction

-- his experience as interior minister and his "liberal,"

free-market oriented convictions -- he seems particularly

well-suited to lead France in meeting the key challenges it

now faces: security in this era of global terrorism and

prosperity in this era of adapting to economic globalization.

In addition, Sarkozy's deep identification with American

values -- opportunity, initiative, competition, society that

sustains individual liberty as much as it supports national

power, make him France's best hope for catalyzing the shift

in social values that the French need to make if they are to

take full advantage of globalization.

COMMENT CONTINUED

-----------------

¶14. (C) Sarkozy's vision for France is a powerful one, and,

as his popularity reflects, it resonates with a big part of

the electorate.  However, resistance to social change is

particularly strong in France.  Attachment to the benefits

and advantages that most of them receive, in one way of

another, from the state -- the substance of the "French

social model" -- is very strong among ordinary French people.

Sarkozy's popularity may be a reflection of change the

French would like to make, but are too conservative to in

fact undertake.  End Comment.

STAPLETON