Toronto, June 27 2010
THE PRESIDENT – Ladies and gentlemen, I’ll make four brief comments, before, of course, answering your questions (…).
First point, the bank levy. I believe that for the first time in a document, in an official communiqué from a G20, G8, international summit, the words “bank levy” have been used. So the G20 has very clearly recognized the legitimacy of the possibility of taxing the banks. Taxing the banks to finance insurance systems or bring in tax revenue. So on this first point France got satisfaction. There is a recognized legitimate framework for taxing banks and, already, Britain, Germany and France will be embarking on this taxation process. Not all the countries will do it, some countries consider they have had no problem with their banking sector and don’t want to do it; we can’t force them to. But it’s a great step forward, it’s the first time the word “levy” has been used and so recognized as legitimate.
INNOVATIVE FINANCING/INTERNATIONAL TRANSACTIONS TAX
Secondly, France, supported by Germany, fought hard on the issue of innovative financing and particularly the financial transactions tax, and at the very last minute we managed to get the following text in the final communiqué: “We look forward to the outcome of the UN Secretary-General’s High-Level Advisory Group on Climate Change Financing which is, inter alia, exploring innovative finance”. (…). So clearly, the G20 is expending a lot of effort on the idea of innovative financing and in particular the financial transactions tax.
INTERNATIONAL FINANCIAL SYSTEM REFORM
Thirdly, the reform of the international financial system – something, as you know, we, Christine Lagarde and I, set great store by – is making progress with the positive Chinese moves. In fact at one point President Hu Jintao spoke of the importance of a new international monetary system and so this augurs well for the preparation of the French G20 presidency. The subject is no longer taboo: the whole G20 recognizes that it’s one worth mobilizing for, taking an interest in and decisions on. What form will it take and especially what reform will we end up with? We’re not there yet, but the issue is now clearly on the table.
Finally, fourth point, I’ve already said a word about it: global governance. Here too, the tectonic plates are shifting and many around the G20 table now think it’s urgent to resolve the issue of global governance.
These four points were France’s major objectives. On these four points, things are making progress. Now, of course, we are looking forward with interest to the Seoul G20 which will provide the opportunity for moving forward in other areas, as we ourselves have done on hedge funds, the rules for bonuses and regulation in general. This is scheduled for the Seoul G20. And then, of course, the French presidency which Christine Lagarde and I are actively preparing and we – and I personally – will be embarking on a series of visits to the main G20 players to prepare the presidency and try and obtain the boldest results possible. (…)
PUBLIC DEFICIT REDUCTION
Q. – As regards the reduction in public deficits, have commitments been undertaken and are these commitments recorded in the final communiqué?
THE PRESIDENT – Here the discussion was very useful because it gave us the opportunity to narrow any differences between us. What have we decided? We have said: the G20 is a forum for economic coordination, but economic in the broad sense: energy, sustainable growth, the environment and monetary matters fall within the G20’s remit. The G20 coordinates, ensures the consistency of the different economic policies followed.
What did the G20 say today? That it was legitimate for every country and every region, depending on its own problems and individual circumstances, to have a policy tailored to its situation, and that coordination didn’t mean us all pursuing the same policy at the same time, but policies tailored to the situation in each of our countries and regions, consistent with the others. I personally took an example, saying that, frankly, it wouldn’t satisfy any of our friends from Latin America if Greece embarked today on a vast plan to support economic activity and growth. Every one can understand this.
So this was useful because some of our friends feared that sustainability and budgetary consolidation plans would hurt global growth, and we clearly explained to them what we had done in Europe and why we had done it. David Cameron himself said: “I’ve got a public deficit of 11%, I can’t stimulate and support growth, but my way of supporting growth is to reduce my deficit”. So I think we brought views closer together, of course with President Obama, and that the G20 is demonstrating pragmatism and flexibility. (…)
Q. – Can you give us some details on how the bank levy will operate, and also doesn’t it risk penalizing the French and European banks vis-à-vis international competitors?
THE PRESIDENT – We’re working on the levy at this very moment and I can tell you that on Monday I’ve got a meeting on the budget with the Prime Minister, François Baroin and Christine Lagarde. I’m very familiar with the argument concerning the adverse effect on banks’ competitiveness; it was the same when it came to taxing traders’ bonuses. But my idea of Europe is that Europe has to pave the way. If you say: “we’re waiting for all the others in the world to bring in the bank levy before we do, we might well wait a long time. So we’re going to do it. But you know there’s an international public opinion now and I find it hard to see a country being able to resist the pressure from its own general public saying: our neighbours have taxed banks’ risky activities – because here too we’re endeavouring to discourage them from carrying out excessively risky activities and encourage them to finance the real economy, as it’s called – that’s going to be hard to resist. So we decided to pave the way and we will bring in the levy.
When we present the budget, there will be all this. Now there isn’t unanimity on this. President Obama, for instance, takes the view that the most important thing is to recapitalize the banks rather than tax them. We think we can do both. (…)
Q. – As regards reducing the deficit the communiqué mentions specific targets, inter alia, halving them by 2013. Are these targets put there to please your host, Mr Harper, because that was his idea after all? Or is there genuinely a consensus that these targets can be met in the industrialized countries?
THE PRESIDENT –I don’t think the word "target” was used, as far as I know. Let me add, moreover, that it isn’t as high as the actual commitments we have undertaken with our European partners, since we have committed to 3% in 2013 and 6% in 2011. We talked about this: some people wanted us to be tougher, others want us to be less tough and we found this compromise, which consists in demonstrating pragmatism. We aren’t, for example, going to ask Spain, Greece or Portugal to finance major stimulus plans. Everyone can clearly see that that’s senseless. Similarly, we aren’t going to ask China to massively cut her spending. So I believe what’s been adopted is pretty satisfactory. (…)
BANK LEVY/INNOVATIVE FINANCING
Q. – If some countries bring in the bank levy and others don’t, if some adopt the innovative financing and others don’t, if some countries commit to cutting public deficits and others don’t, what convinces you that the G20 remains the pertinent forum for these issues?
THE PRESIDENT – You’d prefer there to be no bank levy at all? There to be no innovative financing at all? That would be progress? You’re telling me: at the end of the day only a few major countries will have the bank levy, but the others won’t. It’s a start; it’s a step forward, that’s indisputable. But how else do you want us to do it?
The G20 represents a pretty large proportion of the world, so it’s far more difficult to get everyone to move at the same speed and in the same direction. But you see what’s already extraordinary is that we aren’t being prevented from doing it, and the movement will spread and inevitably, we’ll end up all together at the finishing line. But it’s a step forward all the same. Finally, this was the fourth G20 summit, do you realize the progress made? I assure you that we had a huge battle on innovative financing and the bank levy; it’s far harder to win people round at the G20 table than at the G8 table since interests, histories and cultures are incredibly different. (…)./.