With France and with Germany leading the way of Europe’s economic recovery, President Nicolas Sarkozy has both the power and the prestige to launch a reinvigorated campaign against what he calls the “freewheeling Anglo-Saxon” model of finance.
With his countryman Jean-Claude Trichet heading the European Central Bank and UMP ally Michel Barnier soon to be installed as the EU’s internal market commissioner, Sarkozy appears to have everything in place to make the world see “the victory of the European model, which has nothing to do with the excesses of financial capitalism.”
No wonder people are worried in the City of London.
British response
London was quick to respond. Mayor Boris Johnson traveled to Brussels to lecture the European Parliament, but his entourage of rabble-rousers and cameramen did little to persuade them.
Nor was Chancellor of the Exchequer Alistair Darling’s argument that “London is New York’s only rival as a truly global financial center,” and therefore Europe should strengthen, not weaken it, well received.
Earlier, in conference with his colleagues from across the continent, Darling compromised on the creation of a European financial regulator. French finance minister Christine Lagarde praised the deal, which according to Darling leaves considerable responsibility with national authorities.
That is not how his counterparts sold the agreement at home.
French weapons
Nevertheless, there is truth in Darling’s statement. A European Systemic Risk Board is to be put in place to spot irregularities in the financial system, but it will have no power force banks to end questionable practices. It will issue recommendations and warnings.
Sarkozy has more weapons in store to bombard Paris to the world’s next financial capital. A European Alternative Investment Directive would install a framework for all alternative fund managers, which in London is seen as an attempt to shackle another sector of “freewheeling Anglo-Saxon” capitalism.
If that is the case, Paris could gain little. Hedgefunds taking a preemptive decision to leave London headed for Switzerland, not Paris or Frankfurt.
British sensitivities
There is more reason for Londoners to be hopeful. As Ambrose Evans-Pritchard writes in the Telegraph, Barnier is “deeply averse to trampling on British sensitivities.” His director-general, Jonathan Faull, is British.
Given the circumstances, the Barnier-Faull team is the best that Britain could hope for.
Whether that will stop Sarkozy remains to be seen.
Consider how much this country depends on the City for its very existence, I doubt the powers that be will let a Frenchman intefere much with that. As it is, Darling is somewhat right, the geographical position of London has allways allowed it to be operating ont he overlap between the oriental stock markets and the Dow. The sheer volume of insurance and banking which goes on in the City accounts fo a sizeable chunk of the economy, probably more of the GDP than simmilar sectors in other EU countries, perhaps dare I say it, the largest in Europe. The Insurance sector is where the money comes from for many banks, less so the actual banking and given that London has hundreds of years, established client firms across the world, I don’t think it has to worry about Paris any time soon. Put simply, the financial sector is the life blood of the state. If Sarkozy attempts to remove that, which I bet he does, being the enemy, then his new system would probably end up bailing Britain out from the poverty following the decapitation of its economy. As long as France gets dragged down, it’s hard for one to care any more. 😀
I think you’re right about London’s financial market being the largest in Europe. Only Frankfurt and Paris and maybe Zurich come close.
Sarkozy likes for La Défense to become the continent’s new financial center and he’s in fact busy revamping the whole of Paris, planning new suburbs all the way to Le Havre.
Having one European regulator instead of two dozen national authorities does seem like something of a smart idea, to further encourage inter-European business and trade. Having such a regulator abide to French rules, well, that sounds less attractive, doesn’t it? 😉