But if we were to step in, we would have to be very attentive not to disturb the way the market values the various risks and spreads. One way to avoid this would be not to buy too many bonds in the same market segment. Has the French government done enough do reduce the fiscal deficit and to improve the conditions for growth? C.N. Social contributions must be reduced, which is currently being achieved through the Social Responsibility Pact. The “Macron Act”, which allows working on Sundays, for example, is certainly a positive step. However we have not done enough on the labour market, and I hope that the other reforms will see the light. We need a more flexible minimum wage and more room for negotiated arrangements in firms and branches, like in Germany. Public finances will only be sustainable and credible if the reduction in the structural deficit continues, in particular through a downsizing of the public sector. Structural reforms must gain momentum in order to support growth. Interest rates will eventually rise and the governments that have not implemented the necessary reforms will find themselves in a difficult situation. Your second term as Governor is coming to the end. What were the highlights? C.N. Naturally, the financial crisis. The most important event has been the creation of the Banking Union.
With the sustained budget surplus and accumulated surplus on the Exchange Fund and Land Fund assets, the actual amount of foreign reserves in Hong Kong amounted to $ billion at the end of September, the third largest in the world. This is more than seven times Hong Kong dollar cash in circulation or over three times $ M1. 30. The currency board system has an automatic adjustment mechanism to maintain exchange rate stability. When there are outflows of funds from the Hong Kong dollar, the Hong Kong Monetary Authority (HKMA) will sell US dollars to banks for Hong Kong dollar. On settlement day, the HKMA will debit the clearing accounts of the banks for the necessary amounts of Hong Kong dollars in return for the US dollar that will be credited to the New York accounts of the same banks. Since banks may have sold more Hong Kong dollars than they have in their clearing accounts with the HKMA, they can only obtain Hong Kong dollars by borrowing from other banks, by bidding up the interbank rates, or selling back the US dollars to the HKMA, that is, by reversing their short position. In fact, the banks do not hold excess Hong Kong dollars because they are generally long in foreign currency. The latest data at the end of July shows that the Hong Kong banking system is short roughly $ billion or $ billion. 31.