French leader Sarkozy urges tight regulation in address at World Economic Forum in Davos

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Sarkozy calls for tighter regulation

DAVOS, Switzerland — French President Nicolas Sarkozy offered a broad riposte to unrestrained free-market capitalism at the World Economic Forum, telling the gathering of business and political elites to prepare for tighter regulations including new accounting rules and executive pay limits.

Sarkozy, giving the keynote address Wednesday, said the risks were too great if “we do not change the regulation of our banking system and the rules for accounting and prudential oversight.”

He expanded his criticism to target what he considers reckless free trade, profits without job creation and currency manipulation.

“Finance, free trade and competition are only means, not ends,” Sarkozy said. “From the moment we accepted the idea that the market was always right and that no other opposing factors need to be taken into account, globalization skidded out of control.”

The French leader’s speech contrasted with much of the tone on the opening day of the five-day conference in Davos, where business leaders warned that a flood of new regulations risked choking off a global economic recovery.

Sarkozy chose a key moment, just hours before President Barack Obama’s first State of the Union address, where he is expected to address reforming Wall Street. Bankers at Davos, however, disagreed.

“Let’s get good regulation, better regulation, but not more regulation,” said Peter Levene, chairman of British bank Lloyd’s.

Peter Sands, the CEO of Britain’s Standard Chartered Bank, added that his industry already has been “fundamentally changed” by tighter regulations and supervision, while Deutsche Bank Chairman Josef Ackermann said “we will all be losers” if governments clamp down on markets too zealously.

“The pendulum might have swung too far,” Ackermann warned. “Consistent and global rules, and a level playing field is absolutely key to the global economy.”

Sarkozy, however, called for a regulatory and cultural upheaval.

“The signs of recovery that seem to herald the end of the global recession would not encourage us to be less daring,” Sarkozy said. “Rather, we must be even bolder,” he said, calling for better economic governance, worker protection, public debt reduction and rules against tax evasion.

He called for stimulus packages to be withdrawn slowly so they don’t alarm jittery markets. But he laid down the gauntlet to chairmen and CEOs in attendance by saying excessive profits and pay packages “will no longer be tolerated” when they have no relationship to the creation of wealth and jobs.

Free trade, he added, has “weakened democracy” because it has been prioritized above all else.

Sarkozy also praised Obama’s efforts to move banking away from reckless speculation, and raised the question of tougher taxes on banks to ensure safer investment policies and combat poverty.

Associated Press writer Bradley S. Klapper contributed to this report.