François Villeroy de Galhau: European and French economic outlook and post-Brexit financial architecture Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the 2019 Paris Europlace International Financial Forum, Tokyo, 28 November 2019. * * * Ladies and gentlemen, It is a great pleasure to be with you again in Tokyo, with my colleague and friend Governor Kuroda. The Paris Europlace international financial forum in Tokyo is now a well-established tradition… even if the topic of your sessions touches upon “new frontiers in finance”. In my remarks today, I will elaborate on the European and French economic outlook, before turning to the future European financial architecture after – and beyond – Brexit. ** I. Causes of and answers to the current European slowdown The causes of the European slowdown initially lay outside the euro area: of these geopolitical uncertainty is undoubtedly the most important; it is mostly man-made, and must be fixed by man. We are witnessing a significant slowdown in global trade due to the escalation of trade disputes. The consequent loss of global growth could reach up to 0.8% next year according to the IMF, mainly due to indirect effects, beyond tariffs: the fall in business confidence and investment, the decrease in productivity. Similarly, the twists and turns of Brexit have created market volatility and weighed on business investment. The effects of the slowdown are very acute in the euro area’s biggest economy, Germany, which is very much exposed to global trade. Structural trends are also at play.
I would like to make a clear pledge: the Basel III agreement is intended to apply everywhere in a consistent manner, including of course in the United States. Those anywhere who would recommend not transposing Basel 3 would give in to the temptation to forget, ten years after the Great Financial Crisis; they would take the responsibility of increasing financial stability risks, at a time when these risks are already significant. That said, rest assured that we will insist on a fair and reasonable implementation in Europe, taking into account the specificities of the European banking sector in order to avoid undue impact on capital requirements. II. The French economy is resilient, with growth expected at 1.3% this year Despite this darker context, the French economy is resilient, with growth expected at 1.3% this year, three times higher than the German one. This expansion is being sustained by a robust internal demand. Real household income per capita is accelerating sharply (increasing by around 2% in 2019) at its fastest pace since 2007, due to the fiscal stimulus and to a larger extent to the strength of labour income – 1 million jobs have been created over the past four years. Many important reforms have already been adopted. Of course, much remains to be done to tackle structural unemployment, which is still too high. III. Beyond Brexit, building a new European financial architecture Brexit is and remains bad news for everybody but above all for the British economy.