'A naked attempt to steal our crown': France's most senior banker makes enemies in London after suggesting businesses move from capital
Christian Noyer said City of London should be stripped of its status – with businesses moving into Euro ZoneBoris Johnson and Vince Cable lead criticism of 'desperate French attack'
17:35 GMT, 3 December 2012
Bank of France Governor Christian Noyer: '[It's a] consequence of the choice by the UK to remain outside the euro area'
France's most senior state banker was today accused of a ‘naked attempt to steal London’s financial crown’.
Christian Noyer, 62-year-old governor of the Bank of France, said the City of London should be stripped of its status, and the bulk of its business be transferred to mainland Europe.
But a furious Boris Johnson, Mayor of London, said: ‘This is a desperate French attack in an effort to make something out of the Eurozone crisis.’
Mr Johnson added that the move ‘shows utter contempt for the principles of the single market and it will not succeed.’
Mr Noyer, a Paris-born career financier who has worked in Brussels, insisted there was ‘no rationale’ for allowing the Eurozone’s main financial centre to be ‘offshore’.
Britain has never signed up to the single European currency, Mr Noyer argued, and ‘most of the euro business should be done inside the euro area.
‘It's linked to the capacity of the central bank to provide liquidity and ensure oversight of its own currency,’ Mr Noyer told the Financial Times.
‘We're not against some business being done in London, but the bulk of the business should be under our control. That's the consequence of the choice by the UK to remain outside the euro area.’
Vince Cable, Britain’s business secretary, also attacked Mr Noyer, saying: ‘I don’t think his analysis is correct.’
During a visit to Paris, Mr Cable said other ‘serious French bankers’ believed that ‘having a strong UK financial sector is important for Europe. It is not a zero sum game. We want to be part of a single market in financial services.’
The City of London has served as Europe’s main financial centre since the setting up of the single European currency.
Lord Mayor of London Boris Johnson and Business secretary Vince Cable both criticised My Noeyr's words today
More than 40 per cent of euro foreign-exchange transactions are conducted in London, a bigger share than the rest of the Eurozone combined.
Mr Noyer’s attack is the latest in a long list which have been launched by French financiers on Britain.
Shortly before Standard and Poor’s stripped France of its AAA credit rating in January, Mr Noyer said that Britain’s rating should be cut before that of France as the UK had ‘as much debt, more inflation, less growth than us’.
Jean–Pierre Jouyet, the head of the French financial regulator, has also described the right–wing of British politics as ‘the world's stupidest’.
EU leaders meet on Tuesday to try to broker a deal on giving the European Central Bank (ECB) sweeping powers to supervise lenders.
The move, which will not include Britain, will be the first step towards creating a Eurozone banking union.
George Osborne, Britain's Chancellor, backs a union in principle, but has pressed for safeguards to stop the new bloc from forcing its rules on non-members.
Christian Noyer has come into criticism in the past for not revealing his salary, which is said to be well into six figures – making him one of the highest paid civil servants in France.
After studying in Rennes and Paris he did his military service in the Navy, and then became a Treasury secretary before spending two years as a French respresentative to the EU in Brussels in the early 80s.
He was vice-president of the European Central Bank for four years up until 2002, and was appointed governor of the Bank of France in 2003.
Fiscal tactics: An ECB scheme that allows it to purchase a eurozone country's sovereign debt, is vital to restoring the functioning of monetary policy and dispelling fears that the euro currency block could break up
Noyer, a European Central Bank governing council member, also defended the tactic of pumping money into ailing economies.
Warning that global economic growth
remained sluggish and fragile, he said: 'Expansion in central bank money
has not affected inflation expectations, which have remained
BANKS AND INDEPENDENTS
Noyer poured cold water on
perceptions that central banks may have lost some independence after the
global financial crisis in 2008, arguing that the non-conventional
measures taken by major central banks were never imposed by governments.
'In all countries, non-conventional
measures and the consecutive expansion of balance sheets were a
deliberate and voluntary response to financial market developments that
threatened their integrity, their functioning and overall economic
Bank of Japan Governor Masaaki
Shirakawa, who spoke alongside Noyer in Tokyo, also appealed for
understanding that the BOJ doesn't adjust monetary policy to match
'While central banks should have deep
respect for financial markets…they should be willing to stand up to
the market from time to time,' he said.
The BOJ has been under intense
political pressure to take bolder action to beat deflation that has
plagued Japan for more than a decade.
Shinzo Abe, the head of a main
opposition party set to win next month's general election, has called
for 'unlimited' easing to achieve 2 per cent inflation and a possible
revision to a law guaranteeing the BOJ's independence.
In any case, central banks have 'many tools' available to mop up liquidity when needed, he added.
An ECB scheme that allows it to
purchase a eurozone country's sovereign debt, known as outright monetary
transactions (OMT), is vital to restoring the functioning of monetary
policy and dispelling fears that the euro currency block could break up,
Noyer said it was also up to eurozone
governments to improve public finances and use structural reforms to
make the region's economies more competitive as a sovereign debt crisis
that started in Greece is poised to enter its fourth year.
'It has always been perfectly clear
that the responses to the real roots of the crisis can only be provided
by the governments themselves and that monetary policy can never durably
mitigate political shortcomings.'
Noyer also rebuffed criticism that
the ECB's government bond purchases could be equivalent of monetising
public debt, saying that the central bank is allowed under law to
conduct such purchases from the secondary market.
The OMT can only be enacted if a
country applies for a bailout and agrees to improve public finances and
implement sometimes painful structural reforms, he said, so the strict
conditions will help bolster confidence in the region.
ECB policymakers hold their regular
monthly policy meeting on December 6 and are widely expected to leave
interest rates on hold at a record low of 0.75 per cent. Economists are
divided on whether the central bank will cut next year.