christian noyer : challenging times for finance and banking in europe keynote address by mr christian noyer, governor of the bank of france and chairman of the board of directors of the bank for international settlements, at the paris europlace international financial forum, paris, 8 july 2014. * * * ladies and gentlemen, dear arnaud, i am pleased to be able to give this keynote address today for our paris europlace international financial forum, before the round tables begin. these are challenging times for economic policy - makers, central bankers and professionals working in the field of finance and banking in europe i will address three questions : is the euro crisis over? does europe face the prospect of a lost decade? what short - term policy challenges are we facing today? and i will finally say a few words about recent changes in our communication strategy. i. is the euro crisis over? less than two years ago, the euro area was fighting for its existence. euro pessimists were questioning its ability to survive. not anymore. analysts may be questioning europe ’ s ability to grow. but the challenges that we are facing are different. they are macroeconomic, not existential or systemic. thanks, mainly, to the eurosystem ’ s actions, financial conditions are normalising. spreads in peripheral countries have been dramatically reduced. soon, budgets will be reasonably balanced and there will be no more fiscal drag on the economy. households and corporates have strong balance sheets. recent forecasts put german growth at more than 2 %, italy in positive territory, and the outlook for france has improved markedly. growth of business activity in the euro area in april was the highest in the past three years. but the crisis has left an important legacy : money and financial markets remain excessively segmented. the monetary transmission mechanism is severely impaired and credit conditions are still very different across countries and sectors. deleveraging in the banking sector still acts as an impediment to recovery and growth. bank credit remains flat in the euro area as a whole, and smes ’ financing is a major concern, especially in stressed countries, where the percentage of financially constrained but viable borrowers is estimated at 25 % vs 1 % in “ core ” countries. we are very aware that balance sheet repair is a prerequisite for credit to resume and for monetary policy to be efficient. so, we are addressing the problem as a priority. 1. we are building a safer and more robust system of financial intermediation

without state aid. that is why i have no concerns about the french banking system. should banks ’ customers, companies and individuals, fear a credit crunch? no, and the figures bear it out. french banks ’ lending activities remain very robust : up 8 % for mortgage lending, up 5. 6 % for corporate lending and up 5. 1 % for lending to smes. it is precisely their retail banking business that makes them sound and profitable. bis central bankers ’ speeches is france condemned to undergo a period of prolonged austerity? france must be extremely rigorous in the management of its public finances. a balanced budget must rapidly be restored, which presupposes in particular a structural reduction in government spending. like many other countries, we have been living above our means for too many years. we need to stop accumulating debt. growth will return if confidence does. and to reinstate confidence, we must guarantee that our public finances will be consolidated. bis central bankers ’ speeches