Sarkozy Advocates Systemic Change After Crisis

"The long-term effects of the crisis are impossible to gauge," he told the lower house of the German Parliament, adding, "One thing seems probable to me: The United States will lose its status as the superpower of the global financial system."

Sarkozy said that he had discussed the crisis with Merkel and that the two major European leaders share a similar view of what went wrong and what must be done to restore stability. The goal, he said, must be to establish a reasonable balance between government regulation and freedom to take initiatives. But for the moment, Sarkozy made clear, the priority is to put in place more regulations to prevent the unbridled speculation that he said led to the current crisis.

"We must regulate the banks to regulate the system," he said.

As he did during a visit to New York last weekend, Sarkozy suggested that the high-flying traders and executives responsible for the crash should be made to pay, through fines if not criminal prosecution. "Impunity would be immoral," he said to loud applause.

In the same vein, Sarkozy said banks must change the way they remunerate traders and executives. The current system, he said, pushes such people to take risks rather than conserve their clients' money. If French banks cannot come up with a more acceptable way to pay their employees by the end of the year, he said, the French government will step in and do it for them.

"There has been too much abuse, too many scandals," he said.

Correspondent Craig Whitlock in Berlin contributed to this report.