Christian Noyer, governor of the Bank of France (2003-2015) HARDtalk

the country towards dictatorship. There are accusations that the polls

cannot be trusted. It is time for HARDtalk.

My guest is one of the most influential voices in global

finance. He was made Governor of the Central Bank of France following

extent of being governor for 12 years. Before that, he was the vice

president of the European Central Bank and has worked with every

leading financial institution. He has been tasked with making the case

for Paris as a financial hub following Brexit. Is he making too

difficult a cell and damaging ties with the UK -- sell. Christian Noyer

in Paris, welcome to HARDtalk This is the fourth President that you are

serving under in some senior capacity. Emmanuel Macron is a

former banker. Is he the right president at the right time for

France? Well, first, thank you very much for inviting me. I think yes,

absolutely. For the first time for many years, we have a president who

was elected with a clear political programme for deep economic reforms,

and he has a clear mandate to make difficult reforms in the labour

market, and the tax regime, to have something much more business

friendly, and this is going to take place quite rapidly. So I think that

comes exactly at the right moment, because we are now in, in Europe in

general, it in the eurozone, leaving the negative consequences the

crisis. Growth is picking up, and I think it is the appropriate time to

raise the growth potential and try to size the benefits of a full

recovery. We will talk about the reforms in France presently, but

just underscoring the approach, the intention to make friends more

competitive is so that it can compete, for instance, in trying to

pick up in picking up some of the business from the City of London,

post-Brexit. Why is Paris best placed? I think there are several

assets for Paris, which are generally recognised by all the

institutions I am talking to. The first one is probably that Paris is

the only big city comparable to London in size, with a range of

active and activities, which means that there is a whole range of

financial activities, big banks, and dealer and broker activities, but

insurance asset management, financial technology, and there is

no other comparable city in Europe. That is interesting, though. You say

all that, and that is your opinion, obviously. But when you look at what

major financial institutions are doing, they don't necessarily back

Paris. Japan's biggest bank has decided to set up its new based in

Amsterdam. Barclays have gone elsewhere. There is a lot of

competition, is in there? That is absolutely true. One is to make a

difference between the place where the financial institutions decide to

put their legal entity, and the place where they would locate their

activities. At a number of those which said that they would choose,

or have chosen to have their legal entity, at least for the first two

years, in, say Frank Little Amsterdam, or Dublin, they have told

me they intend to concentrate sizeable activities in Paris. --

Frankfurt. So it is not because the hub or the legal entity will be

somewhere that it will be a concentration of all activities

there. So I think it is a bit misleading to just look at those

news. By the way, MUFG that you just mentioned as already had a bank in

Amsterdam. So they keep using their banking there. Is this what you are

being told. -- told? A lot of institutions are looking at

Frankfurt, and of course Germany is the biggest economy in Europe. Many

banks has said that Frankfurt is going to be their main base. Are you

being told some indifferent behind-the-scenes? Absolutely. --

something different. In Paris, there is a talent pool. Other cities are

relatively small cities, and that includes transit. In franc that, for

instance, the activities are concentrated in banking. But if you

want to move a big number of staff, coming with families, spouses or

partners, and want to find jobs in other activities, it is more

difficult than in a big city like London or Paris. Who has

specifically said this too? Do you want to name some of the banks? --

said this to you. The majority of international banks, be they

Americans or Europeans or sometimes Japanese or Asian in general, they

tell me that, that they intend to put a sizeable part of their staff

in Paris. OK. As it stands, the figure is like 30% of the European

Union's financial assets managed in the City of London, which is twice

as much then London's nearest rival, Paris. London is admired globally,

and respected as your's financial centre. It does not necessarily mean

that any business lost to the City of London post-Brexit is going to go

the way of Frankfurt or Paris. Boris Johnson, the British Foreign

Secretary, said the real rivals of the City of London are going to be

in Hong Kong, Singapore, and New York. He has a point, doesn't he?

First, I don't believe that London will disappear as a major financial

centre. London will continue to have a very important role and

activities, and that is a good thing. In particular, given the

proximity and the facility to move between them London and Paris, I see

a lot of easiness in having teams working in London and teams working

in Paris. But more specifically to your question, if there are things

that institutions have two move, and they will have to move some

activities to the EU, it is because the rules will impose that those

activities are done in the EU. -- to move. If they have to move to the

EU, they cannot move to New York or to Asian places. They need to move

to the EU or be given up. All the institutions say they want to

continue servicing their clients, they do want to lose their capacity

to service them. They don't want to lose the business related to it. So

they will do what it is necessary to continue servicing the clients. So

you just said that you don't agree that the City of London would

necessarily suffer. So just broadening that point, do you think

Britain will suffer economically as a result of Brexit? Two first, to

the question, the City of London will lose something. There has been

over the last 20 years, the concentration of something. London

was the dominant financial centre, but Paris was an important financial

centre. A lot was done in other cities, Frankfurt and so on. So

there will be some loss for the City of London, but not to the point that

the city would be badly damaged. If the City of London loses 15 or 20%

of its activity, it will remain one of the biggest financial centres in

the world. Second, more generally, on that - it depends on agreement

that can be reached or not reached on trade. I think the most difficult

part of the negotiations is indeed related to trade, manufacturing

activities, agriculture and fisheries, and that will be

difficult. That is the most important in my view for the future

of the British economy. And there has been quite a controversy here in

the UK. Boris Johnson, the Foreign Secretary, and Liam Fox, the

international trade Secretary, perhaps not seeing eye to eye with

Philip Hammond and Amber Rudd over the issue of freedom of movement of

people post-Brexit. How does this row look from your side of the

channel? Well, I think the basic view of the EU 27 is that if you

want to continue to have full access to the market, be it for the

long-term, or for a transition period, you need to, to follow all

the major parts of the EU governance, and the EU governance of

basically the capacity of its institutions to regulate the

capacity -- to regulate, the capacity to reconcile disputes, and

powers that are in the EU rules, freedom for goods and services, and

financial flows, and not for people. After that, how it will be settled

exactly will depend on the negotiations, of course. As the

negotiations and the debate over Brexit continue, as we have been

discussing, other EU countries are trying to capitalise on the

situation post-Brexit. The French by Minister Eduard Phillippe has said

that France will use all its power to make Paris the European financial

capital. -- Prime Minister. But is this trying to capitalise on the

spoils are little unsavoury? Especially given the strong alliance

with the UK. I think you have two - I understand your question, but you

have two take two things into consideration. One is that

historically London has not been the financial centre of the EU for

decades and decades. -- to take things. The result of hybrid

concentration in London is the result of the single market, which

means that a single regulation and a single judicial system. -- high

broker concentration. Bizarrely, or to a point, the Grecian of the euro.

-- -- the creation. We reached a state which is very different to 20

years ago. Having the ambition to come back to what we had 20 years

ago, it is not aggressive in any way. Coming back to a normal state

of things. It is understandable that countries would be alive to the

opportunities that Brexit might provide to, you know, present a

different - different opportunities for countries. But what I want to

put to you is that the French seem to go farther. Jeremy Broun, who is

now the envoy for the Brexit operations of the City of London, in

a leaked memo said this: The French are happy to see outcomes

detrimental to the City of London, even if Paris is not the

beneficiary. They are crystal clear in their underlying objective- the

weakening of Britain. France sees Britain as anniversaries, not

partners. What is your response about? This memo, whatever has been

leaked, to me, is absolute nonsense. If I may say so. With all due

respect to whoever. He is reported to have this you, I don't know. I

did not check myself. But I think the report, the presentation is

really not that great at all. France is in the same position as the rest

of the EU. The position is embedded in a common position. The chief

negotiator is Michel Barnier. And he is the one who clearly said, and

will say it what needs to be said from this site, from the EU. So

there is no willingness to create problems for the City of London or

the UK. But one is to recognise that we have, we have eight common

concern, that is an enormous concern, and that is financial

stability. I mean, we just went through - the world just went

through an enormous financial crisis. We know it is absolutely key

to have the capacity to regulate and supervise, with full capacity, and

full powers, the financial sector, and a financial activities. And when

you have financial stability concerns, you have to make, to take

decisions as to what is best or worse in the different options that

are offered to you, and only those responsible for the monetary area

can do that. So it must be the EU institutions having this power. And

I cannot imagine- if it was imaginable that the City of London

was dealing with the euro, and would be regulated by EU institutions,

where the judge would be in the European Court of Justice, but the

central bank, with full, 100% power, in the euro system, and the market

regulator would be established in Paris, with no powerful Westminster,

or the Bank of England, or for the UK regulator, then maybe we could

have another system. But I do believe that this is, that this is

imaginable. This is why we believe that...

A rather large and so. The election of a medal in May, we are seeing

France in a more assertive way than it was under Francois Lond. --

Emmanuel Macron. He wants to make it more market oriented. There is a

great deal of opposition within fronted self from ordinary citizens.

-- France itself. The labour market reform, the first one to be

implemented, is a perfect example of something which is processed quite

smoothly and very well. There have been many discussions with the

unions. There was no big opposition. Can I just interrupted? The CGT is

saying it is getting ready for street protests for relaxing these

labour laws, to make it easier to hire and fire workers. We will have

to wait and see. At the moment, things are going smoothly. The

discussions have gone through all of the topics. For a number of things,

it was largely consensual. The Parliament as well has an enormous

majority, well beyond a simple party supporting President Macron. But

there is still... Can I just say, there is still protesting going on.

800,000 students upset about cuts to allowances. Civil servants,

teachers, several sectors are opposed. Well, you should not mix

everything. There was no big demonstration at the moment. Nothing

happened in Paris. No one is in the streets demonstrating. Yes, there

was some opposition expressed about some fiscal measures taken. The

government has to make cuts in spending. They tried to find ways to

do that as smoothly as possible. But it... The problem exists in all

countries, in many countries. I want to come back to the series of

reforms, we don't have time to go into all of them, they are to make

France more competitive, but it is perceived in that way. For example,

the French economic observatory had a study in July saying the richest

10% in France gave the most from the overhaul from income and property

taxation. I cannot go into that completely but that is one example,

and also, the measures hit the poorest foremost. That is a quote.

When you meet the press, you don't get that feeling there is such

opposition at the moment. I have never seen in many years so much

consensus to support the global economic reforms in the making. I

think people are ready to understand that labour market reforms are aimed

at reducing unemployment that we have not been able to reduce

significantly over the last decade. It is something we have not tried

until now. Until the first reforms were made. It is rather consensual.

They address the problem of unemployment. But you have got a

huge... Sorry. The tax reforms. Of course, the direct taxation would be

the wealth tax, income tax. It is extremely concentrated in France.

OK... 60% of... We cannot go into the details of the taxation system.

But one other example as to why perhaps it is not as smooth as you

suggest. President Macron has seen his approval ratings plummet by ten

points to 54%, the best declined when compared to predecessors, like

Francois Lond and Nicolas Sarkozy. -- Hollande. I don't want to

comment. I am not a political and take. That was just an example. But

in general, the policy was widely supported. At least for the moment.

The people so want to give a chance to be president and the government

to make the economic reforms and move ahead. Of course, you have to

make cuts in expenditure, and it always creates opposition. I don't

think it is significant. There is still the necessary support to make

these reforms. It really addresses unemployment. But you are going to

have, in terms of the image of France, that its reputation is still

a place that is difficult to do business. France was 29th in terms

of this. The UK, seventh. In June, a report said a banker in France costs

54% more when all payroll charges are included. It takes you three

years to fire someone in France compared to three months in

Switzerland and three days in the UK. You have still got a long way to

go to convince people that somebody such as US tried to do this. What I

can say is that it is misleading. -- such as you is trying to. It does

not take three months. It takes 4-6 months. It is comp ruble to Germany,

the maximum in Germany, or the UK. -- comp comparable. All of those

reports I made... I am telling you... They are not... Can I

interrupt you to give you the source? It was the Head of UBS

France, who told a committee earlier this year. It is a recent statement.

Well, it was probably taken from reports done four years ago. Before

2013, yes, the situation was really different. But in the meantime, we

have made four incremental reforms on the labour market. I think we

already have the situation which is not so different from Germany. And

with new reforms, we will move somewhere a twin Germany and the UK.

-- between. Hopefully closer to the UK. It will be a different

situation. It won't be that far away from the UK, perhaps Ireland. It

will have a more flexible labour market. Christian Noyer, in Paris,

thank you very much indeed for coming on HARDtalk. Thank you very

much. The area of low pressure that

brought Wednesday's rain