France's Prime Minister Edouard Philippe during his speech at Eruoplace
10 July 2019

Paris Europlace: the challenges to overcome

On 9 July 2019, the Prime Minister delivered a speech at the Paris Europlace International Forum, which seeks to promote and develop the Paris financial centre. Edouard Philippe took the opportunity to point out that "the French economy has become the most competitive and attractive in Europe" and that three challenges remain to be overcome: the reorganisation of the European financial system, the financing of growth, and sustainable finance.
 
Two years ago, said the Prime Minister, France embarked on a huge transformational shift to become the most competitive and attractive economy of Europe, by working to improve in areas such as labour law, taxation, appetite for entrepreneurship, public transport and public expenditure.

Commitments made in these areas have been implemented and reforms are ongoing, for example, to unemployment insurance and the pension system.

The results can be seen, with:
  • Unemployment at its lowest level in ten years.
  • A growing purchasing power and diminishing taxes. In 2019 and 2020, France will have experienced the largest decrease in taxes since 2007.
  • A reduction in public spending in volume terms for the first time in 40 years.
  • The highest number of new businesses being created in 20 years.
  • Private business investment at its highest level in 12 years.
  • France is once again becoming a host country for investors and talent from all over the world.
However, for Paris to maintain its position as the leading financial centre on the continent, three challenges must be overcome:

Reorganising the European financial system

Respecting Britain's choice to leave the European Union (EU) does not equate to being subjected to it. This therefore involves reorganising the European financial system and developing its autonomy. It is indeed inconceivable that the European financial system should depend on a financial centre located outside the EU, far from the needs of its companies and regions and the supervision of its regulators, particularly during periods of crisis or instability.

It is therefore a question of both stability and sovereignty and France will resolutely defend European financial sovereignty. It will defend the powers of its regulators, its regulations and the interests of European growth. This will be done in a way that respects the balance between the need for financial stability and the ability of European players to take risks. To achieve this, France will ensure the development of healthy and fair competition with financial institutions located outside the Union.

As such, careful attention will be paid to the accurate assessment of the consequences on the European economy of the final Basel III agreement, as well as its timetable and procedures for transposition in Europe, taking into account the specific features and needs of the European economy and the choices that will be made in the different geographical areas, in particular in the United States. The idea is not to impose standards on ourselves that are disproportionately burdensome compared to those of others.

This political discussion must also focus on reviewing the framework of the Solvency 2 Directive on insurance, which will be another major project of the next Commission, to promote long-term European investment.

Financing European growth

It must be possible to find, set up and develop funds in France and Europe to finance innovative and growing companies.

This involves making savings work harder in France, with a fiscal component (implementation of a straightforward and decipherable "Flat Tax” and the transformation of the impôt de solidarité sur la fortune (solidarity tax on wealth – ISF) into the impôt sur la fortune immobilière (property wealth tax – IFI) to no longer penalise money that benefits companies) and with a regulatory component (modernisation of retirement savings, increased flexibility in the Plan épargne action (share savings plan – PEA) and unit-linked life insurance).

It is because of the need to free up French savings that a financial centre that works to promote these new products is required, by opening up:
  • to financial players who relocate,
  • to fintechs that develop new services for savers,
  • to funds and management teams specialising in the sectors of the future.
This challenge is not only faced by France, but also by the rest of Europe, with greater financial integration so that European savings better finance European companies. It must become possible to raise financing more easily and at a lower cost, to diversify the geographical origin of financial assets and to better spread the risk. This also involves building truly European financial players.

To give new impetus to capital markets, France, together with Germany and the Netherlands, has launched a high-level group to make proposals. This will doubtless produce results, like the rebirth of Euronext, which has extended its federal model to other European stock exchanges.

Sustainable finance

The coming months will be those of ecological acceleration. France has set itself the objective of achieving carbon neutrality by 2050. This objective, enshrined in Article 1 of the energy-climate bill currently under discussion, must become a European objective: this is what young people all over Europe expect.

All major commercial revolutions – such as Venice – and industrial revolutions – railways - have come about with the support of private funding. And many bankers, insurers and investors have horizons of between 10 and 30 years. The ecological transition follows the same horizon and enables profit to be associated with ethics.

The Paris financial centre can take part in this:
  •  To propose financing tools for ecological transition. The Paris financial centre demonstrated its capacity for innovation in this field very early on, with the launch of the first major issuances of green bonds.
  •  To propose green savings solutions for European investors. Savers who, like consumers – often one and the same – want to give meaning to their savings. The Plan d'action pour la croissance et la transformation des entreprises (Business Growth and Transformation Law – PACTE) will facilitate access to green and solidarity-based financial products. And the Paris financial centre has real expertise in the management of socially responsible investments.
  •  To make ambitious commitments in the field of sustainable finance, such as those that French banks undertook on 2 July.
  • To build quality non-financial information for companies. Behind these standards are a vision and values; those of the role of companies in the world, their vocation and their ethics. It is therefore necessary to “think Europe" in this field, and the Government will take initiatives in this field for the new European mandate.
Paris Europlace International Forum website