Prime Minister talks about need to promote and develop Paris as a financial centre
European Union – Paris Europlace international forum – Speech by M. Edouard Philippe, Prime Minister (excerpts)
Paris, 9 July 2019
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Perhaps some of you know Willie Stark. He was governor of a state in the southern United States. Let me reassure those of you who haven’t heard of him: he didn’t exist. I mean in real life. However, he very much existed under the pen of Robert Penn Warren. In his book All the King’s Men, to express his impatience the fictional governor Willie Stark repeats the phrase: one of these days is never today.
Let’s admit it, for years in France we somewhat overused the phrase “one of these days” when we had to carry out the reforms our country needed. And the results were “never today”. Some of our European partners went from strength to strength. France, on the other hand, grew weaker despite exceptional strengths. So, dear Willie Stark, dear friends, let me assure you: France has stopped procrastinating.
For two years, it has committed itself to an extensive process of transformation to become Europe’s most competitive, attractive economy. We aren’t there yet and we’ve still got work to do: to make the Paris financial centre more competitive and make it easier to relocate financial activities – not just for the pleasure of hosting them, but to finance our economy, factories, laboratories and shops.
Desire for reform isn’t enough to succeed. We must act methodically, overlook no areas, remove all the obstacles blocking our economy: labour law, the tax system, appetite for entrepreneurship, public transport, public spending and asset purchasing power. As you were paying very great attention during our last two meetings, I won’t list them exhaustively. It should just be noted that every commitment I made has been implemented and the reforms are continuing. Last winter we began transforming our civil service. On 18 June I detailed the central objectives of our unemployment insurance reform. Finally, we’ll soon be starting to transform our pension system.
I don’t believe in chance, and I’d like to remind investors and the French people of a few results I’d describe as encouraging. These results are:
unemployment which has reached its lowest level in France for 10 years;
rising purchasing power and falling taxes. In 2019 and 2020, France will have seen the greatest fall in taxes since 2007;
a reduction in the volume of public spending for the first time in 40 years;
the highest number of start-ups for 20 years;
the highest level of private business investment for 12 years;
and our country is once again welcoming investors and skilled people from all over the world. It isn’t me saying this, but organizations, indicators and independent attractiveness rankings which haven’t always been very kind to us in the past.
Perhaps I’ve spent rather a long time listing these results. You shouldn’t in any way see this as an exercise in self-satisfaction. That’s not how we work. I’m just pleased and proud that my country is finally exploiting its tremendous potential. And besides, these results are proof, which is always comforting, that in politics as elsewhere, consistency and coherence pay off.
So today we’re at a crossroads. (…)
Europe and France need finance. They need a robust financial system to attract this finance. And the Ile-de-France’s elected representatives and I want Paris to hold its ranking as the number one financial centre on the continent. In my view, this involves taking up three challenges.
The first challenge is Brexit. We’ve never considered Britain’s departure from the European Union to be good news; quite the opposite. But the British people made a sovereign choice, and we must respect it. That doesn’t mean being subjected to it. Europe must forge ahead, in every sphere, particularly the financial sphere.
Brexit leaves us with no choice other than to reorganize the European financial system, developing its autonomy and complementarity. (…)
It isn’t conceivable for the European financial system to depend on a financial centre situated outside the European Union; beyond the needs of its businesses and territories; and beyond the supervision of its regulators – especially during periods of crisis or instability. So it’s a question of both stability and sovereignty.
So France will resolutely defend European financial sovereignty. It will defend its regulators’ powers; it will defend its regulation; it will defend the interests of European growth. It will do so with due regard for the balance between the imperative for financial stability on the one hand, and the ability of European players to take risks on the other. And to achieve this, we’ll ensure the development of healthy, fair competition with the financial institutions located outside the EU. This is why we’ll be paying the utmost attention to the detailed assessment of the consequences on the European economy of the Basel III final agreement. We’ll also be keeping an eye on its timetable and its procedures for transposition in Europe by taking account of several things: first, the specific features and needs of the European economy; but also the choices which will be made in the different geographical areas, especially in the United States. The idea is not to impose standards on ourselves which are excessively restrictive compared to those of others. It’s a fundamentally political issue. The discussion hasn’t begun. So the issue remains unresolved.
Let me add that this political discussion will also have to focus on the review of the framework of the Solvency II Directive in insurance, which will be another major project for the next Commission, to promote long-term European investment.
Indeed, the second challenge is to fund tomorrow’s European growth.
I can’t be satisfied with a situation in which our businesses, start-ups and unicorns are forced to raise capital in the United States and Asia in order to grow, for lack of a sufficient capital base in Europe. We must be able to find, build up and develop funds in France and Europe to finance our innovative and growing businesses.
This means – at any rate, as far as France is concerned – making our savings work more effectively. And that’s why in 2017 we embarked on a powerful transformation of the French savings landscape, with two aspects.
A taxation aspect, creating a simple, transparent flat tax, as well as transforming the ISF [Solidarity Tax on Wealth] into the IFI [Property Wealth Tax] to stop penalizing the money that benefits our businesses.
The second aspect of this transformation is regulatory. Its aim? To correct the economic biases in regulated savings and make the financial products that fund businesses more attractive: hence the modernization of pensions savings, increased flexibility on the PEA [Share Savings Plan] and unit-linked life insurance.
And it’s because we want to free up French savings that we need you: a financial centre which makes active efforts to promote these new products, opens up to financial players who relocate, and opens up to Fintechs that develop new services for savers. A centre that opens up to funds and management teams specializing in promising sectors. French savers, both private and institutional, deserve what’s best to make their money bear fruit.
This isn’t a solely French challenge. It’s also European. In any case, that’s what we’re expecting of banking union and the single market in financial services: to ensure that Europeans’ savings do their “Erasmus” by financing European businesses.
You may know the OECD figure whereby the share of financial assets held in the form of fiat money or low-yield currency accounts for 10% of household portfolios in the United States, compared to 20% in the United Kingdom and 40% in the 27-member EU.
Very often, discretion is the better part of valour. In spite of everything, we must give European savers a little more taste not for risk but, shall we say, for action. And for returns too! Because the two necessarily go together in a long-term, low-rate environment.
And we also need enhanced financial integration, because we need European savings to fund European businesses more effectively. We need to raise funds more easily and cheaply, diversify the geographical origins of financial assets and better distribute their risks. This also means building truly European financial players. And – why not? – succeeding in the financial sector in the same way we’ve succeeded in other fields.
Let’s admit it: the Capital Markets Union’s record in the latest European term of office is modest. And we must inject fresh momentum. That’s why France, Germany and the Netherlands have created a high-level group tasked with making proposals for relaunching the Capital Markets Union.
I’m confident. Europeans know how to spring a surprise. Many of those in this room probably remember the perplexity surrounding the rebirth of Euronext five years ago. Well, five years on, the recovery is here. And Euronext has extended its federal model to other European stock markets. We don’t need any hang-ups. In any areas.
The third and final challenge is sustainable finance.
As I said in my general policy declaration, the coming months will be those of ecological acceleration. France has set itself the goal of achieving carbon neutrality by 2050. We’ve also written this goal into Article 1 of the energy-climate bill currently under discussion. It must become a European goal: that’s what all young Europeans expect.
To make this transition a success, we’ll need investment. Public investment. We’re devoting very significant resources to it. But above all we’ll need private finance. Now, contrary to what some stereotypes suggest, I don’t believe finance is intrinsically the enemy of the long term. I’m not naïve. I know there are still purely speculative, opportunistic financial behaviours that can weaken European businesses’ capital and the smooth running of the capital market in Europe. A lot of people on the ground are talking about these issues at the moment. It’s a useful discussion which we support and would also like to champion at European level.
But the real financiers are, in my opinion, “financers”. And those financers are often visionaries who reason in the long term. All the great commercial revolutions – think of Venice – and industrial revolutions – think of the railways – emerged with their support. And many of you here – bankers, insurers, investors – have horizons spanning between 10 and 30 years.
That’s fortunate! The ecological transition shares the same horizon. The technologies are mature. The demand – for clean vehicles, low-carbon energy, good quality food and recycled products – is there. The needs are no longer emerging. They’re pressing. I obviously know I can count on your commitment. However, there’s no ban on combining profitability with responsibility.
So we need your investment. We also need your professions, to do several things:
Propose finance tools to support the ecological transition. Very early on, the Paris financial centre demonstrated its capacity for innovation in this field, launching the first major green bond issues.
We need your professions to offer green savings solutions to European savers, savers who, like consumers – they’re often the same people – want their savings to make sense. The PACTE [Action Plan for Business Growth and Transformation] act will facilitate access to green and solidarity-based financial products. And the Paris financial centre boasts genuine expertise in managing socially-responsible investments.
We need you to make ambitious commitments in the sustainable finance field, like the one French banks made on 2 July.
Finally, we need you to build high-quality extra-financial information for businesses. Let’s make no mistake: behind these standards, there’s a vision. And values. Those of businesses’ role in the world. Of their vocation. Of their ethics. And whoever manages to impose their criteria will impose their vision. When people talk to me about values, when they talk to me about responsibility or producing standards, well, I think “Europe”. I think of the balance perhaps struck best by the Europeans, between economic efficiency and responsibility. Between freedom and protection. The government will take initiatives in this field for the new European term of office. (…)./.