Fin24

Sarkozy puts food prices on G20 agenda

2011-01-24 14:46

Paris - French President Nicolas Sarkozy said in a speech laying out his Group of 20 (G20) agenda on Monday that the world's top economies must agree new measures to curb volatility in commodity markets or risk destabilising food riots.

Speaking to some 300 diplomats and journalists in the Elysee presidential palace, Sarkozy also voiced support for a tax on financial transactions, calling such a move a "moral question" but admitting the idea had many enemies.

"We want regulation of primary commodity financial markets," said Sarkozy, who holds the rotating 2011 presidency of the Group of 20, a grouping of the world's leading rich and developing economies.

"How can you explain that we regulate money markets and not commodities?

"If we don't do anything we run the risk of food riots in the poorest countries and a very unfavourable effect on global economic growth," he said. "The day there are food riots, what country at the G20 table will say this does not concern them? I don't see a single one."

Sarkozy has a three-pronged agenda for France's G20 presidency, including tackling volatility in commodity prices, exploring changes to the world monetary system and reforming global economic governance.

He has been meeting with fellow G20 leaders, including US President Barack Obama and China's Hu Jintao, in recent weeks to win support for his plans and assess what France can realistically achieve during its presidency.

Sarkozy appears to have garnered little support for his idea to establish a new Bretton Woods system, the monetary order set up on the ashes of World War Two which relies heavily on the US dollar.

"France does not wish to call the role of the dollar into question," he said on Monday in a tacit acknowledgement of strong resistance from Washington.

His suggestions for creating a permanent institutional framework for the G20, parallel to the International Monetary Fund (IMF) and World Bank, have also failed to gain traction, shifting the focus of his G20 presidency to commodities - a theme that is also seen as a potential vote winner in next year's French presidential election.

France blames speculators


Wheat prices in Europe nearly doubled in 2010, while a global economic rebound helped push oil prices nearly 30% higher in the last four months of 2010 alone.

France, the European Union's biggest grain producer, has blamed financial speculation for contributing to soaring commodity prices, although analysts are divided over whether this has played as significant a role as economic fundamentals in driving price levels.

Policymakers are concerned that rising food prices could stoke inflation, protectionism and the kind of unrest that has been seen in Tunisia and Algeria in recent weeks.

High food prices could also hit consumer spending in fast-growing emerging countries that are leading the revival of the global economy.

"Shortage fuels speculation and speculation fuels shortage," Sarkozy said, making clear France wanted to regulate markets in commodity derivatives, not kill them. "There's no market without rules. This is a truly key issue," he said.

Last month, the EU commissioner in charge of financial reform Michel Barnier proposed a clampdown on commodities speculators, following Washington which has acted to prevent spikes in food prices.

Barnier, a former French agriculture minister, wants traders to disclose their trading positions, a cap on large trades and new powers for regulators to intervene to curb speculation.

Sarkozy's popularity is hovering near record lows at around 30% and he desperately needs results from his G20 presidency to convince a sceptical electorate that he deserves another five-year term.