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MERVYN KING EXPRESSES DOUBT
OVER DAVID CAMERON AND
GEORGE OSBORNE

Article history

2010-02-17 EMBASSY LONDON CONFIDENTIAL/NOFORN

SUBJECT: BANK OF ENGLAND GOVERNOR: CONCERN ABOUT RECOVERY,

Classified By: Ambassador Louis B. Susman

1. (C/NF) Summary. Reining in the UK’s debt will be the greatest challenge facing the party that wins the expected May 6 general election, Bank of England Governor Mervyn King told the Ambassador in a February 16 meeting. While neither party has adequately detailed plans to reduce the deficit,
King expressed great concern about Conservative leaders’ lack of experience and opined that Party leader David Cameron and Shadow Chancellor George Osborne have not fully grasped the pressures they will face from different groups when attempting to cut spending.
King also raised concerns about the global economic recovery, arguing that global growth in 2010 would be anaemic and a double-dip recession remained a possibility. Greece’s profound economic troubles will trigger a further consolidation in power within the euro-zone, with Germany and France likely to impose the right to scrutinize if not exercise some control over Greek government accounts in return for an implicit or explicit guarantee, he predicted. The UK has been on the sidelines in the debate over Greece and could have less influence in the EU, as Germany and France will seek greater political cohesion in the euro-zone in the aftermath of the Greek crisis, he stated.

Bleak UK and Global Economic Picture

2. (C/NF) For the next ten months, the UK faces the challenge of adopting deficit-reduction measures, controlling inflation and
addressing rising unemployment …
Businesses will cut jobs faster this year and eliminate many part-time positions, as employers realize that economic recovery will be a long, drawn-out process, said King …

Conservatives - Not Prepared

4. (C/NF) Conservative leaders
David Cameron and George Osborne do not fully grasp the pressures they will face when attempting to cut back on spending, when “hundreds of government officials will make pleas of why their budgets should not be reduced,”
stated King. In recent meetings with them, he has pressed for details about how they plan to tackle the debt, but received only generalities in return. Both Cameron and Osborne have a tendency to think about issues only in terms of politics, and how they might affect Tory electorability. King also raised concerns that Osborne’s dual roles as Shadow Chancellor of the Exchequer but also as the Party’s general election coordinator could create potential problems in the approach on economic issues.

5. (C/NF) King also expressed concern about the Tory party’s lack of depth.
Cameron and Osborne have only a few advisors, and seemed resistant to reaching out beyond their small inner circle.
The Cameron/Osborne partnership was not unlike the Tony Blair/Gordon Brown team of New Labour’s early years, when both worked well together when part of the opposition party, but fissures developed - for many reasons - once Labour was in power. Similar tensions could arise if Cameron and Osborne disagreed on how to handle the deficit.

7. (C/NF) The euro-zone’s move to greater political cohesion could poise some disadvantages for the UK, King speculated. During the February 16 ECOFIN meeting, euro-zone governments politely listened to Chancellor Darling when he commented on the
situation in Greece, but he was not invited to attend internal discussions since the UK is not part of the euro-zone. It would be incumbent for the UK to demonstrate that it has something meaningful to say and to be constructively engaged in the EU, should this greater political cohesion among the euro-zone governments occur, commented King.

NICOLAS SARKOZY STRIKES FEAR
INTO HIS ADVISORS

Friday, 04 December 2009, 11:49

CONFIDENTIAL SECTION 01 OF 04 PARIS 001638

NOFORN

Classified By: Ambassador Charles Rivkin for reasons 1.4(b) and (d).

1. (C/NF) Summary. At the mid-point of his five-year term, French President Sarkozy continues to be the dominant, virtually unchallenged, political force in France. Slowed in domestic reform efforts by entrenched interests and the world-wide financial crisis, Sarkozy is increasingly focused on successfully leveraging France’s foreign policy influence on the global stage. Ambitious and action-oriented, Sarkozy doesn’t hesitate to break traditional French policies and reach out to new partners, from Saudi Arabia and Syria to India and Brazil. His impatience for results and desire to seize the initiative – with or without the support of international partners and his own advisors – challenges us to channel his impulsive proposals into constructive directions with an eye to long-term results. Sarkozy himself is firmly convinced of the need for a strong transatlantic partnership and he has long desired to be THE major partner to the U.S. in Europe, whether on climate change and non-proliferation or Iran and the Middle East. Our effort to secure increased French contributions in Afghanistan offers an interesting perspective on the centralization of key decision-making powers in the French President and how to best work with Sarkozy as a valued, and valuable, partner. With high-profile events like the Non-Proliferation Treaty (NPT) prep-com next spring, and Sarkozy preparing to lead France’s chairmanship of the G-8/G-20 in 2011, we believe we can best secure our interests across a broad front through continued close consultations with our French partners (including, and perhaps especially, at the highest levels), with an eye to leveraging Sarkozy’s strong political standing, desire for
action, and willingness to make difficult decisions into force multipliers for our foreign policy interests. End Summary.

DOMESTIC DRAMA BUT NO DOMESTIC OPPOSITION

2. (C/NF) Sarkozy’s domestic standing is virtually unchallenged despite lagging opinion polls which place his personal approval ratings at 39 percent. His center-right UMP party controls both houses of parliament, and opposition leaders in France have spent the past two years fighting among themselves rather than mounting any serious political challenge to the incumbent president. Sarkozy’s policy of “openness” in appointing opposition politicians to high-profile positions has contributed to the leadership drain on the left. IMF President Dominique Strauss-Kahn and FM Kouchner are just two examples of this successful political ploy. Despite this political security – or perhaps because of it – there is some internal grumbling about Sarkozy’s high handed style within his own party, revealed by the recent attempt to name his 23-year-old son Jean Sarkozy, who is still an undergraduate student, to a position at the head of Paris’s most prestigious business development commission. A brilliant political tactician, Sarkozy is raising the profile of the March 2010 regional elections to rally his base and steal voters from the far right as part of a ramp-up to his re-election bid in 2012. While this makes him more sensitive to the near-term domestic political impact of certain foreign policy issues (like Afghanistan), his domestic stature remains fundamentally secure, freeing him to focus on his goal of leveraging French power in Europe and globally.

FOREIGN POLICY SUCCESSES AND CHALLENGES

3. (C/NF) The net result of Sarkozy’s dominance of the domestic political scene is that he is also one of the most secure leaders in
Europe, with no awkward coalition partner or imminent presidential elections to distract or hinder him. Sarkozy occasionally recognizes that to be heard on the world stage – whether on strategic questions or the global financial crisis – France’s voice is amplified when speaking in concert with others. Sarkozy has worked hard to successfully parlay an initially awkward personal relationship with German Chancellor Merkel into a smoothly

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coordinated tandem that drives much of European policy. Likewise, he will frequently pair with Merkel and UK PM Brown to add needed clout to messages in Brussels and Washington. Sarkozy’s ability to leverage his (and France’s) voice on the world stage by building on strategic partnerships is one of his greatest strengths; one of his greatest weaknesses, however, may be his impatience and penchant to launch proposals with insufficient consultation with other major players.

4. (C/NF) Sarkozy’s most visible successes to date are largely in the foreign affairs domain, with his greatest achievements within Europe. He championed the Lisbon treaty in his first months in office, helping to end the stalemate over reform of EU institutions. This was succeeded by his leadership of the rotating EU presidency in the second half of 2008, which included the creation of the Union for the Mediterranean (UfM), the launch of the EU’s counter-piracy operation, and his negotiation of a cease-fire after the Russian invasion of Georgia. Characteristically, he didn’t hesitate to disregard European sensitivities by attempting to retain the lead on specific portfolios where he doubted the Czech ability to provide the necessary follow-on EU lead after Prague took over the rotating presidency in January 2009. On security issues, Sarkozy is equally bold. He personally authorized additional French troops for Afghanistan at the 2008 Bucharest NATO summit and this year he fought to bring France back into NATO’s integrated military
command, reversing more than 40 years of bipartisan French policy, in spite of strong skepticism within his own party and intense opposition from others.

NEW PARTNERS, NEW IDEAS

5. (C/NF) In a departure from previous French leaders, Sarkozy has also devoted a great deal of effort to reaching out bilaterally to countries like Israel, Saudi Arabia and Syria, recognizing that they are major players in the Middle East where French ambitions have been frustrated. French officials are convinced that Sarkozy’s outreach to Syria has made Syrian President al Asad a more productive partner in resolving Middle East issues (although they are hard-pressed to provide concrete examples of a change). Sarkozy fully recognizes the growing role played by emerging powers like Brazil (he has meet with Brazilian President Lula nine times in the past two years) and India (whose troops he invited to star in the July 14, 2009 military parade). He lobbied successfully for the G-20 meeting in Washington to address the global financial crisis, and he supports an expanded UN Security Council, which earns him additional popularity among rising powers. The Elysee has also looked to Brazil as a partner in climate change negotiations and a buyer of French defense equipment – including potentially the first overseas sale of the Rafale fighter aircraft. All of these outreach efforts stem from genuine convictions as well as an eye to the image of France at the center of a global network of influential leaders.

6. (C/NF) Sarkozy is most prone to disappoint when, in his impatience for action, he effectively “gets ahead” of other key players and his own advisors. Sarkozy is firmly convinced that the most intractable diplomatic problems can only be solved by getting leaders together in person to cut through bureaucratic red tape and make bold decisions – hence his predilection for proposing
summits. He has little patience for the incremental steps of diplomacy and once he latches onto an idea he is loath to let it go. Impatient for progress in the Middle East, he has sought ways to make France a player, first through creation of the UfM and second by championing a summit, either in the guise of the UfM or now through other partners (such as the U.S., the Quartet, etc) to achieve his goals. In another example, his surprise announcement last June in support of a new treaty on European security architecture took many allies, and his own staff, by surprise. Although that debate has been channelled into the OSCE Corfu process for the present, Sarkozy is already chafing at what he considers lack of progress on this strategic issue and is continuously tasking his staff to come up with new proposals to address the impasse of CFE, improve the partnership with Russia, and provide other ideas to overcome blocked initiatives.

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NO ONE TO SAY “NO”

7.
(C/NF) Sarkozy has few restraints – political, personal or ideological – to act as a brake on his global ambitions. Domestically, he rewards party leaders prepared to adopt his policies and marginalizes any opponents with a diverse view. Several “favored” cabinet ministers with high profiles early in his administration – including Rama Yade and Rachida Dati – were subsequently bumped into secondary jobs after having disagreed with Sarkozy. On the other hand, State Secretary for European Affairs, Pierre Lellouche, willingly muzzled his long-term outspoken support for Turkish Accession to the EU in exchange for his current post. While Diplomatic Advisor (NSA-equivalent) Jean-David Levitte remains a key player, with an extensive background in diplomacy and a calming personality, other advisors like Secretary General Claude Gueant are playing an increasingly public role. Despite having Sarkozy’s ear to various degrees, few
appear to exercise any significant degree of influence over the activist president.

8. (C/NF) Sarkozy’s own advisors likewise demonstrate little independence and appear to have little effect on curbing the hyperactive president, even when he is at his most mercurial. Elysee contacts have reported to us the great lengths they will go to avoid disagreeing with him or provoking his displeasure – even recently reportedly re-routing the President’s plane to avoid his seeing the Eiffel Tower lit up in Turkey’s colors on the visit of PM Erdogan (a decision made by the Paris city hall). After two years in office, many seasoned key Elysee staff are leaving for prestigious onward assignments as a reward for their hard work, raising questions as to whether new faces will be any more willing to point out when the emperor is less than fully dressed.