–Adds Fuller Quotes On Euro, Dollar, World Monetary System, Commodities

PARIS (MNI) – France’s President Nicolas Sarkozy Thursday launched
an impassioned defense of the euro, declaring that the Eurozone’s two
largest members will never let it fail and that even considering such an
idea is out of the question.

Addressing the World Economic Forum in Davos, Switzerland, Sarkozy
declared that “[Germany's Chancellor] Angela Merkel and I will never,
never let the euro fall.” He reiterated the statement, saying that they
would “never, never let the euro be destroyed.”

He added: “The disappearance of the euro would be so cataclysmic
that we can’t even play with the idea.”

The single currency, Sarkozy said, is more than just a political or
financial issue. It stands at the core of European identity. He cast
monetary union as a symbol of the continent’s break with its tortured
past of the last century.

“The very fact that 17 countries have availed themselves of the
same currency, to imagine that we might pull out of the euro is a
complete misunderstanding, a misapprehension of the state of mind of
Europeans that have been at each others’ throats for centuries and who
now aspire to one thing only and that is [to be] locked in peace,”
Sarkozy said.

“It is not just an economic and monetary issue, it has to do with
our identity as Europeans,” he added. “The euro is Europe, and Europe
has spelled sixty years of peace on our continent.”

The French president then threw down the gauntlet to financial
markets.

“For those who wish to wager against the euro, be careful how you
invest. We are determined to ensure the strength of the euro in a
structural manner.” He said Germany, France and other European
governments would be coming forth with a plan “in the coming weeks” to
“deepen and further integration.”

Sarkozy paused on several occasions for emphasis, and when he asked
the audience if he was being clear enough about the euro, he elicited a
strong round of applause.

Sarkozy renewed his now-familiar call for a new monetary order,
asserting, as he had earlier this week, that “since 1971 [when the gold
standard was dropped] we have not had an international monetary system.”

In a reference to talk of a “currency war,” Sarkozy said it was
hard to blame governments for running unilateral foreign exchange
regimes when there is no system in place as an alternative.

At the same time, Sarkozy offered assurances that in urging the
creation of a new system, “no one is calling for a return to fixed
exchange rates.”

And he reiterated that he had no desire to attack the U.S. dollar
or challenge its pre-eminence.

“Nobody wants to weaken the dollar. The world needs the dollar,”
Sarkozy declared, noting that 60% of the world’s foreign exchange
reserves are denominated in greenbacks. “The dollar is and will remain
the world’s top currency,” he said.

“But does predominant currency mean only currency?” he asked
rhetorically, addressing his remarks to “our friends across the
Atlantic.”

“Do you consider that you are so open to the world that the
renmimbi has no importance, that the yuan doesn’t exist?” He noted that
the Chinese yuan is not represented in the basket of currencies that
make up the IMF’s special drawing rights, despite the Asian juggernaut’s
dizzying rise as a global economic player. “Is that the way we should
continue?” he asked.

Sarkozy’s main underlying argument was that huge shifts in the
economic balance of power require a new system that takes account of the
new reality.

He conceded it would be gradual process. “I know we are not going
to define in one year a new international monetary system, but at least
let’s lay the foundation.”

He renewed his criticism of lack of transparency and speculation in
commodities markets, saying it was exacerbating the serious global price
increases and food shortages in some countries. “Speculation feeds on
shortages and shortages are made worse by speculation,” Sarkozy said.

“We need regulation — not excessive regulation, [but] we need
regulation, because regulation means transparency,” he said. “Let us
calmly set up some reasonable rules so that we can have a market that
functions normally and no one can upset the basic rule of supply and
demand.”

Sarkozy also renewed his call for the creation and implementation
of a set of indicators, overseen by the International Monetary Fund, to
better measure and curb global financial imbalances.

“I think that it would be very useful to rethink the IMF’s remit
and statutes to see it as the world forum in charge of coordinating
macro-economic policies, financial and monetary policies,” he proposed.

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