Deflation is especially dangerous because, as the experience of Japan has shown, once it becomes entrenched, it is very difficult to stop. From this perspective, there is no deflation today in the euro area. Prices are still increasing and, most important, so are nominal wages. And, as I said, inflation expectations remain firmly anchored in positive territory, even in the short run. Second, low inflation provides economic stimulus by boosting real income. In most parts of the euro area, nominal wages are downward rigid. Every time inflation “surprises” on the downside, it creates an unexpected increase in real wages and purchasing power. I believe this mechanism is playing some role by improving economic sentiment and supporting consumption as we have seen in the euro area over the past months. That said, when inflation is too low, it carries very significant dangers and risks. First, it makes real adjustment more complicated. With low inflation, there is smaller scope for downward adjustment in relative prices and real wages. As you know, the euro area strongly needs such adjustments in order for some countries, including France, to regain competitiveness. This would no doubt be made easier if the overall euro inflation rate stays closer to our definition of price stability. Second, low inflation makes it difficult to attain low, or negative, real interest rates, that are necessary in all advanced economies at the current juncture. Finally, low inflation increases the risk that the economy could fall into outright deflation if and when it is hit by a negative shock.

The assets managed by their foreign subsidiaries are estimated to be worth more than € trillion, adding to the € trillion euro managed out of Paris. Finally, with regard to the regulatory aspects, and to meet international requirements, France believes that regulation is a major competitive driver. First because trust, investor protection and market robustness are essential and, second, because the regulatory process and better regulation principles are worked out to accompany financial innovation in accordance with prudential principles. Our regulators are taking driving initiatives to harmonise the European regulatory framework and facilitate the integration of the European financial market in order to increase its critical mass and therefore its efficiency even for non-European investors and issuers. That is why also the French market is continually being upgraded to the highest standards of ethics and corporate governance so that French companies comply with best international practices. Ladies and Gentlemen, As we can see, globalization and structural changes are driving all of us to conduct business in a different way and offer new and major opportunities, especially through the development of crossborder activities. In this context, Paris EUROPLACE is a key player at the European and global level and the Paris financial center currently offers the best opportunities and environment to invest in Europe. Let me conclude by mentioning that Paris EUROPLACE is today launching a financial services cluster dedicated to financial innovation and the development of new value added projects between academic research and industrial companies with the participation of market professionals, universities and research centers.