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Cablegate: Senior French Advisor Discusses the Financial And

VZCZCXYZ0003
PP RUEHWEB

DE RUEHFR #2158 3311407
ZNR UUUUU ZZH
P 261407Z NOV 08
FM AMEMBASSY PARIS
TO RUEATRS/DEPARTMENT OF TREASURY WASHDC PRIORITY
RHEHNSC/NSC WASHINGTON DC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 4925

UNCLAS PARIS 002158

SENSITIVE
SIPDIS

H PLEASE PASS TO HASC CHAIRMAN SKELTON

E.O. 12958: N/A
TAGS: EFIN PREL OREP FR
SUBJECT: SENIOR FRENCH ADVISOR DISCUSSES THE FINANCIAL AND
ECONOMIC CRISIS WITH CODEL SKELTON

1. (SBU) Senior advisor in the office of the French
President Damien Loras and House Armed Services Committee
Chairman Skelton and colleagues engaged in a lively
discussion of the financial and economic crisis during a
meeting November 24. They also briefly discussed relations
with Russia. Participating in the bipartisan Codel were:
Chairman Ike Skelton (HASC), Congressman Solomon Ortiz
(D-TX), Congressman Rick Larsen (D-WA), Congresswoman
Madeleine Bordallo (D-Guam), Congressman Tim Murphy (R-PA and
Congressman David Loebsack (D-Iowa). DCM and Political M-C
also participated.

2. (SBU) Loras praised Washington's willingness to host the
G-20 Summit meeting. He sought to dispel any lingering
suspicion that France had wanted the U.S. to host in order to
spotlight the U.S. as the source and center of the crisis.
Instead, he argued that it was important for a "refoundation"
to start in the U.S. and in the west and for the United
States to keep control of the process and be at its center.
He was quick to stress this should not be seen in opposition
to trends in emerging economies, but to ensure others not
take advantage of our divisions. Loras went on to say the
crisis cannot be solved without the involvement of big
emerging economies like China, India and Brazil. To get
their support, they will need a bigger role in the IMF and
possibly in a G-8 type structure that is larger than eight,
but smaller than the G20 format. Loras also sought to dispel
any differences over the speed and extent of regulatory
initiatives, saying that many in France welcomed Washington's
push back against traditional French calls for greater
regulation. Sarkozy, he argued, was trying to wean France
away from over regulation and toward a freer market economy;
the financial crisis has made this more difficult, but
Sarkozy remains committed to reform.

3. (SBU) Loras urged maximum coordination in rolling out
stimulus packages so that we can together have a maximum
impact on the world's economies. Responding to a question,
Chairman Skelton and others referred to a stimulus package
under discussion in the Senate that both Houses may consider
when they resume work December 8. They also noted that if
no agreement is reached, President-elect Obama has made clear
he wants the new Congress to begin work on January 6, when it
is sworn in, and to have a stimulus package ready for him
shortly after inauguration. The package could be in the
range of USD 150 billion to 300 billion or more. Part of the
package would focus on infrastructure projects, as well as an
increase in food stamp projects and as a down payment on a
tax cut package. Funding would likely be through deficit
spending. Loras noted that France is trying to work with EU
partners to develop the largest stimulus package possible.
The UK has already announced its plans; Sarkozy was meeting
with Merkel the same day to try to win support for national
decisions that would be coordinated to have the greatest
impact. France hopes this can be announced at the December
meeting of European Heads of State.

4. (SBU) Asked about Russia, Loras presented the French view
that the government in Moscow is a sometimes dangerous and
unpredictable partner. Sarkozy and France believe it is more
important to engage with them; that it is not in our interest
to let them be isolated. The decisions taken to expand the
EU and NATO were good decisions, but going further could
provoke Russian non-cooperation on issues from Iran -
including selling Iran surface to air missiles - to pipeline
disruption to nuclear waste disposal that would not be in our
interest. Engaging Russia is a long-term process. But the
current economic crisis has proven that the Russians can't
improve their economy alone and need our help. Even their
economic assistance, which he said was almost USD 200 billion
so far, had had no domestic impact. In Sarkozy's view it is
better to have Russia with us than against us, but not, he
emphasized, at any cost.

5. (SBU) Codel Skelton staff authorized us to transmit this
cable without review by the Codel.

STAPLETON

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