The heads of state of the G20 meet this weekend in Brisbane in a global economy more sluggish, especially for the euro area. What can they decide to boost growth?
It is true that growth forecasts have been lowered for the entire global economy. Two factors are involved: a less dynamic than expected and the slowdown in emerging countries is due to the economic restructuring Europe. There is a broad consensus within the G20 to focus on improving the growth potential of greatly reduced by the Great Depression. Global growth can no longer be done by household debt, companies or states. Is there a healthier and more dynamic model we need. The euro zone is a perfect illustration. Countries that have undertaken structural reforms, such as Spain, Ireland and Portugal, are beginning to receive dividends.
France does it his own work on reform?
The direction is good, namely the reduction of the structural deficit and support growth through reforms. But the pace is inadequate. There are so many things to do. Many reforms have positive effects in the short term could and should be made: a frank liberalization of Sunday work, the accelerated reduction of regulations that hinder the construction of housing, etc. And medium-term potential growth of France could be enhanced significantly through a reform of the labor market.
That is to say?
Review the indexing of the minimum wage mechanisms give more latitude to the social partners at variance with the legal working in the business, relax the rules of dismissal. Another major project should involve the consolidation of administrative structures, marked by numerous duplicates, between State and local authorities, and between government agencies. We can not just see the map of regions and departments must aim for a complete reorganization of the public sphere.
The plane stopped in extremis 3.6 billion by France to avoid a red light from the European Commission on its 2015 budget based on tax increases, not new economies ...
We need to focus on reducing public spending and stop the tax inventiveness. It is clear that the proposed tax increases now generate a pronounced rejection. It is therefore necessary to reflect in depth on all the public policy favoring the pursuit of efficiency.
The European Commission should it impose on France strict conditions to report back to 3%? Some European states are moved by the fact that France has already obtained a time and did not realize the expected reforms ...
This is the European Commission and France's partners to answer this question. I think in any case it is not at all unusual that they have their say on how France is consolidating its public finances and reforms that resulted. Compliance with the Stability Pact and the commitments made by states is the basis for confidence in the euro zone. It is an essential element for restoring confidence of businesses and households. These are the states, including France, have sought to strengthen the collective oversight of public finances and the European economic governance. It is logical that we are asked accounts today. And we are asked to go further in the reforms.
The ECB will she be forced to revise downward its forecasts for growth and inflation in December?
We can expect that the ECB move in the same direction as the international bodies like the IMF regarding growth forecasts. But that does not mean that our scenario is still that of an economic recovery. Our inflation forecasts depend on the latest developments related to energy prices. In the meantime, it is true that the fall in oil prices weighed on the level of inflation, but at this stage we continue to expect prices to strengthen in the coming months, with a rise in the inflation rate above current 1% in 2015.
The threat of deflation is ruled according to you?
I do not think that deflation is a credible risk. The risk is mainly that of inflation too low for too long. This is the reason that led us to take a series of measures.
The pressure is very high for the ECB to do more. The IMF and the OECD in particular called for massive purchases of government debt. Do you agree?
The IMF and the OECD have not really detailed reasons. However, we have already taken a number of measures that are well suited. The ECB cut rates in negative territory, that neither the Fed nor the Bank of Japan did. She has made commitments on the future course of monetary policy and bank refinancing facility: today, banks can borrow from the window at 0.15% for 4 years, provided restart lending. We operate in the market for secured debt and soon on the securitized loans, which should also reduce the cost of credit. These measures are already producing results: interest rates have declined on all maturities and it has supported in part the increase in stocks and bonds, creating a wealth effect. In addition, the fragmentation of financing conditions among countries in the euro area has been significantly reduced.
So under what conditions the ECB could buy it in the public debt?
If we find that our current policy has no effect. I would have no problem if the ECB buys other assets and, if necessary, government bonds if such rates in the euro area went up because of a tightening of monetary policy in the United States in 2015. or the economy of the area was under a new negative shock, differing achieving our target price. The ECB must be measure to guard against adverse developments. Care must be taken to calibrate the reaction to maintain the trust and not to offend the public, including in Germany.
For the first time, the ECB refers to the increase in the size of its balance sheet in the monthly statement. Yet it tends to decrease ...
We believe that the second largest loan we offer to banks in December will be more successful than in September. This will inflate the balance sheet, as well as the operations of securities purchases.
If that was not enough to approach the 3000 billion euros that the ECB has in mind, what other assets could be added first?
If we go further and that the conditions do not require purchase of public debt, we can imagine to intervene in corporate bonds. It has already been included in our program, but borrowing in that market rates are already very low. As for bank debt, it is a bit complicated to intervene in the market beyond what we do on the bonds because of the multiple interactions between the Eurosystem and banks. Should measure all the effects induced by these redemptions.
By increasing the ECB's balance sheet, it is your goal to weaken the euro?
Some think that there is a direct link between the size of the balance sheet and the exchange rate . This is particularly the argument of investors who bet on the upcoming launch of a program to purchase government debt and take positions accordingly markets to make money. You have to be careful. The transmission comes mostly from the fact that the asset purchases put pressure on rates across the maturity curve, and it is this phenomenon that weakens the currency. As I said, in the euro area, we are already in this situation.
The decline of the euro that we can already see and that is partly due to the American Recovery -t she could ease the pressure on the ECB?
The evolution of the exchange rate against all currencies, not just against the dollar, is one of the belts of our monetary policy. Sure. The decline of the euro is one of the factors that can fuel inflation. But it is only one factor among others.
European tax on financial transactions could eventually be limited to certain CDS for the derivative component. Are you satisfied with this development?
Yes, this is a very reasonable choice because CDS are derivatives compartment whose utility is the lowest and has the highest risk of destabilizing markets. Other derivatives - share and rates - have real economic value for companies and savings.
Will be discussed at the G20 strengthening equity systemic banks. French banking groups are almost all in the viewfinder. Do you share their fears of not being able to finance the economy?
G20 countries had decided to end the risk of "too big to fail" forcing taxpayers in some countries to put their hands in the pocket during the financial crisis to save major banks to the brink. Strengthen the capital base of these actors and implement procedures for orderly resolution is therefore no debate. The subject of TLAC or "total loss absorbing capacity" addresses the need for large banks have an additional cushion of capital and subordinated debt , sufficient to absorb losses related to their failure. But the device provides a European resolution already known by the acronym MREL for "minimum capital requirement and current liabilities" also similar tool cleverly extended to all banks Europe since the taxpayer was asked to save a lot small and medium banks. In this context it is necessary that the TLAC is calibrated in a reasonable manner so that banks can still afford to finance the economy and they can find on the market volumes sufficient tools to strengthen their capital base. Hence the importance of the impact on banks to be conducted next year for the final calibration study. We also need the cushion articulates with the European system because it is not a question of simply combine the two mechanisms for the same banks.
This cushion of capital he will be more expensive for European banks that do not have an organization holding as US banks?
It is more expensive for the whole banking system even if it is true across the Atlantic, is the holding company that will look securities markets on behalf of the operational structure. In this case, it is ordinary bonds but are recognized as structurally subordinated. In contrast to Europe, lack of holding company, is the operational structure that will pick itself subordinated notes for this cushion. Nobody knows today if some cost more than others but Europe suspect that this is the case against them. The question therefore arises for European players to adopt a holding organization but the answer is not obvious. More generally, I understand the concern of French banks face of mounting domestic and international constraints that may affect their business. Exceptions can not combine an oversized contribution to the single European resolution fund and systemic tax, which is more non-deductible. We must make choices and quickly if all this will affect the cost and availability of credit.
You say that the agenda of the banking regulations coming to an end. However, some, especially the IMF, worry tremendous development of the parallel bank, the "shadow banking." Do you share these concerns and what can the G20?
Ministers and central bank governors of the G20 have seized the issue of shadow banking. It is a universe that takes many aspects and can not be treated uniquely. The G20 has studied the question of funds and money market funds, from the "repo" (repurchase) Market and Derivatives Clearing OTC treated in the opacity caused the collapse of Lehman Brothers in 2008. The summit should also devote Brisbane mutual recognition of financial regulation between the United States and the European Union. Other countries will follow. Work is in progress. We need to study the universe of asset managers. Given the high concentration of industry in the hands of a few firms, we need to understand their systemic or not. The same question applies also to insurance companies and reinsurance companies. This will be one of the axes of the Council's Financial Stability throughout next year.