FRENCH President Nicolas Sarkozy suggested yesterday that European nations should set up their own sovereign wealth funds to prevent European companies falling into foreign hands as share prices plummet.
"I don't want European citizens to wake up in several months and find European companies belonging to non-European capital, which bought at the share price's lowest point," he told the European Parliament.
"All of us here should think about the opportunity to set up sovereign wealth funds in each of our countries," Sarkozy added. "And maybe these national sovereign wealth funds could eventually coordinate to form a business response to the crisis."
Sarkozy is suggesting that state funds act as political investors to head off foreign purchases of European companies - the latest sign governments are considering greater state intervention in the face of the current financial crisis.
In a speech outlining the EU's response to the recent turmoil, Sarkozy also said new rules for financial markets should include a ban on banks with state money working through tax havens and a global system of regulation to prevent a repeat of the market meltdown.
He pledged to use a trip to China this week to persuade Asian nations to sign up to a plan to redraw the rule book for international capitalism.
In Europe, he said the core 15 nations using the euro currency needed to better coordinate their economic policies, including regular summit meetings of euro-zone leaders.
Sarkozy called the first euro-zone summit earlier this month where nations agreed parallel government bank guarantees to shore up their financial sectors - prompting worry from EU members Denmark and Sweden that major decisions were being taken without them.
Sarkozy has previously been a critic of government-owned sovereign wealth funds, which are found mostly in oil-rich Middle East and Asia, but also in Russia and Norway. They control an estimated US$2.5 trillion.
Critics contend the funds offer little transparency and could lead to those countries exerting political power by taking key stakes in strategic sectors like defense, energy or banking.
He hopes the first such summit can be held in November in New York.
Sarkozy said new rules were needed to regulate the markets but insisted the summit would not be about "bringing the market economy into question."
No financial institutions should be able to work without being covered by financial regulations, he said.