François Villeroy de Galhau: New Year wishes to the Paris financial
centre
New Year wishes to the Paris financial centre by Mr François Villeroy de Galhau, Governor of the
Bank of France and Chairman of the Autorité de contrôle prudentiel et de resolution (ACPR),
Paris, 4 January 2022.
* * *
I would like to start by extending, on behalf of the Banque de France and the ACPR, our warmest
wishes, to you, our partners in our daily work: elected officials, financial professionals,
entrepreneurs, associations and members of the media. May this year be as happy as possible
for you and yours, and may your projects be fruitful, despite this Covid ordeal that has lasted too
long, and despite all the uncertainties of 2022.
My first wish is obviously that we finally overcome this pandemic, and that we escape from the
pressure of this emergency and return to the fundamental choices for Europe and our country, in
the long term. The 20th anniversary of the euro, which we are currently celebrating, invites us
to do so.
The euro is without doubt the most concrete success of European integration; it is "Europe in the
citizen's pocket", at the service of the 340 million Europeans who use it across 19 countries.
Moreover, the euro enjoys unprecedented popular support: 74% of French citizens and 78% of
Europeans are now in favour.
The prerequisite for this confidence is price stability, which is the responsibility of the
Eurosystem (the ECB and the 19 national central banks); we have successfully achieved this
primary mission. In France, the inflation rate has more than halved: 1.4% per year on average
between 2002 and 2021, compared to 3.4% between 1982 and 2001. This is not just a statistic, it
is a very concrete reality, measurable by a few examples.
The price of a kilo of bread was EUR 2.7 in December 2001 and EUR 3.6 in November 2021, i.e.
an annual increase of 1.4%. The price of pasta has increased at a much slower rate, with an
average increase of 0.1% per year. The euro has therefore helped to protect the
which has increased by 25% over the last twenty
purchasing power of French citizens,
years. The temporary "inflation hump" that we have been seeing for the past few months,
associated with an unprecedented economic rebound, does not change this observation, and I
will return to this later.
A forward-looking euro means new banknotes after 2024, with a new design, and even more
secure - there are now only 17 counterfeits per million banknotes, making the euro one of the
most secure currencies in the world. It is also a digital euro. The investigation phase for a "digital
retail euro" was launched on 1 October last year, for a period of two years. The aim would be to
provide a kind of "digital banknote", which would combine the security of banknotes issued by the
central bank with the ease of use and innovation of dematerialised means of payment. The ECB
and the Banque de France are working on all the associated challenges, and we have already
conducted 9 experiments in Paris on an "interbank" digital currency. They will be continued in
2022, focusing on improving cross-border payments.
Indeed, the euro is also a global success: no continent before us had managed to create and
introduce a new currency in this way. In this respect, the euro has a political dimension, to
consolidate European sovereignty - like the dollar for the United States. Our currency has proven
its role in protecting European economies from the turbulence of Covid, and has preserved
favourable financing conditions for all economic players, households, SMEs and companies, and
states.
But for the trimaran of the euro to be fully operational, its central hull - the ECB and the single
monetary policy - needs to be completed with two floats. A public float with a permanent
common fiscal capacity (which does not mean that an additional annual budget is needed), to
better cope with macroeconomic shocks. And a private float to promote a better allocation of
capital in the euro area. The latter has abundant savings: the surplus of domestic savings over
investment structurally exceeds EUR 300 billion. It is essential to channel them more towards
financing the two major transformations of the coming decade: the ecological and digital
transformations.
As regards the economic situation, listening to more than 8,000 companies, we will publish our
next monthly survey on Tuesday 11 January, and will provide a first assessment of the effects of
the fifth wave. We remain confident that they will be relatively limited: we have learned over the
past two years that every Covid wave, however serious, has diminishing economic effects. In our
December projection, we showed that even an adverse scenario of further severe health
restrictions - which is not the case today - would not prevent the French economy from
returning by next year to the GDP trajectory it would have followed in the absence of the Covid
crisis. These possible restrictions would admittedly reduce average growth in 2022, but this
should be fully offset by additional growth in 2023.
The other short-term issue is of course that of inflation: it is now close to its peak in our country
(December showing first signs of stabilisation) and in the euro area. While remaining very
vigilant, we believe that supply difficulties and energy pressures should gradually subside over
the course of the year. We should then return not to the low inflation of the past, but to a new
inflation regime close to our 2% target, with monetary policy normalising in stages accordingly.
I would like to finish with the structural projects, on which I hope we will be able to make progress
this year:
the efficient firefighters of the crisis must gradually hand over to the architects.
This is what I would like to see for France, centred around our two major medium-term economic
challenges: insufficient potential growth, associated with the lack of skills and workforce available
to businesses; and excessive public debt and current expenses. We must also strengthen our
architecture in Europe: this year we must finalise regulations for traditional players (banks with
Basel III, insurance with Solvency II), but also regulate new activities: cryptoassets and
decentralised finance. The Banque de France and the ACPR will actively contribute to this within
the framework of the French Presidency of the European Union. This French Presidency will
have served the euro well in its 20th year if it also makes progress on two as yet unfinished
imperatives, the Banking Union and the Capital Markets Union. They are indeed a prerequisite for
better channelling European savings towards the ecological and digital transformations, as I
mentioned earlier.
Indeed, happy New Year 2022 to Europe, to our dear country and especially to each of you!