DAVOS: French President Nicolas Sarkozy went on the warpath over globalization and “indecent” pay for finance executives in a hard-hitting speech at the World Economic Forum on Wednesday.

Sarkozy also implicitly criticized China and backed US President Barack Obama’s plans to clampdown on banks as he described how free market capitalism veered out of control and caused the financial crisis of the past two years.

“From the moment we accepted the idea that the market was always right and that no other opposing factors need be taken into account, globalization skidded out of control,” Sarkozy declared.

Without state intervention to support the financial system there would have been “total collapse,” he said. “Not to draw the conclusion that we must change our ways would be, quite simply, irresponsible.” Sarkozy backed the US president’s plan to restrict the size and operation of US banks.

“President Obama is right when he says that banks must be dissuaded from engaging in proprietary speculation or financing speculative funds,” he said. Taxing the “exorbitant profits of finance to combat poverty” would “contribute to putting us on the path of a moralization of financial capitalism,” Sarkozy said, also praising British Prime Minister Gordon Brown for proposing the tax.

“We cannot avoid the debate on a tax on speculation. Whether we wish to restrain the frenzy of the financial markets, finance development aid or bring the poor countries into the fight against climate change, it all comes back to taxing financial transactions.”

Joining the Davos offensive against the finance industry, he said: “There is indecent behavior that will no longer be tolerated by public opinion in any country in the world.

“There are excessive profits that will no longer be accepted because they are without common measure to the capacity to create wealth and jobs. “There are remuneration packages that will no longer be tolerated because they bear no relationship to merit.”

Sarkozy said it was “morally indefensible” for people who destroy jobs and wealth to earn a lot of money.

“The banker’s job is not to speculate, it is to analyze credit risk, assess the capacity of borrowers to repay their loans and finance growth of the economy.”

But he said global imbalances also had to be put right.

Without naming China, much of his criticism appeared directed at the Beijing government.

“Countries with trade surpluses must consume more and improve the living standards and social protection of their citizens.”

He said that currencies were “central to these imbalances” — again taking up a widely made criticism of China.

“We cannot put finance and the economy back in order if we allow the disorder of currencies to persist. Exchange rate instability and the under-valuation of certain currencies militate against fair trade and honest competition.”

The French leader said the world needed a new Bretton Woods — the 1944 accord which set up the regulatory framework for international finance in the second half of the 20th century.

Until changes can be agreed, “we must prudently manage the adoption of measures to support activity and the withdrawal of surplus liquidities injected during the crisis. We must take care to prevent too abrupt a tightening that would result in global collapse.”

Meanwhile, global business leaders warned Western governments on Wednesday that a populist crackdown on the financial industry could crimp a fragile recovery from the worst recession since the 1930s.

The worried response to Obama’s plans to curb big banks and a British assault on bankers’ pay came as 2,500 business leaders and policy makers met at the World Economic Forum in the Swiss ski resort of Davos.

Surveys produced for the annual conference showed global economic confidence on the rise after deep gloom in 2009 and a cautious return to hiring, especially in emerging markets. But the specter of uncoordinated, heavy-handed regulation and government intervention in the economy was the biggest cloud on many business leaders’ horizon.

Barclays President Bob Diamond challenged Obama’s effort to limit the size of big banks and restrain risk-taking, telling the opening forum session: “I’ve seen no evidence that suggests that shrinking banks and making all banks smaller or more narrow is the answer.”

“If you step back and say large is bad, and we move to narrow banking, the impact of that on banks and on global trade, the global economy, would be very negative.”

Standard Chartered bank CEO Peter Sands said there was a growing risk that fragmented regulatory initiatives would “create enormous amounts of complexity” and encourage financial companies to arbitrage among regulators.

A study by accountancy giant PricewaterhouseCoopers showed business confidence bouncing back after the sharpest drop in economic activity since World War II, prompting more industry leaders to start hiring again.

The survey of 1,200 chief executives in 52 countries found 39 percent of industry bosses aimed to hire extra staff in 2010, while 25 percent planned more job cuts, down from nearly half who slashed jobs last year.