William Horobin, Bloomberg News

VERSAILLES, France
EnergiesNet.com 05 14 2024

Following is a transcript of French President Emmanuel Macron’s interview with Bloomberg Editor-in-Chief John Micklethwait. 

John Micklethwait: President Macron, thank you for talking to Bloomberg. We’re here at your annual Choose France conference for foreign investors. And as long as I’ve known you, you have always wanted to prepare France to like business more but also business to like France more. And you look and you see what is happening here. You have had many successes. You are about to trumpet €15 billion of investment in France, but you also know France has problems; the economy is not growing that much. The economy since you came in has grown roughly half as fast as America. You still have a state that takes up 57% of GDP and you have all that red tape which your government says it wants to get rid of, that is around 3% of GDP. So how do you persuade people to choose France against that?

Emmanuel Macron: Thank you very much for being here in this Versailles castle. This is quite a good wrap up you just made. We delivered a lot of reform since the very beginning, 2017: Tax cuts, flat tax on capital gains. We decreased from 33.3% to 25% corporate taxes. We made a lot of reforms on labor law and after Covid, during the past two years with inflation, war in Ukraine, we passed reform and on pension scheme and unemployment mechanisms. I don’t see a lot of countries around us having done so

JM: But you don’t just want be compared to Europe do you?

EM: No, no, no. My point is, my point is just to say we delivered, we do deliver and we will deliver. And this is why we will launch this week a new bunch of reform on labor markets, we will launch a new bunch of simplification and an attractiveness package for finance, and we will prepare for — we have already launched new simplification — and we will prepare for September a new bunch of reform on labor markets. So it’s a permanent work, but I see where we come from and where we want to go. France was lagging behind clearly in Europe because of too much bureaucracy, a strong system, a lot of strengths, but lack of competitiveness. I thin, I don’t think, I see that we clearly bridged a gap with the others and now we are front-runners in Europe. My concern is not just France, it is Europe in comparison with US and China. And this is the point you mentioned: During the three past decades, we created half of the value per capita created by the US. Why? Lack of innovation, lack of investment, this is the main reason. This is why now my top priority is to have a European policy saying we have to be much more innovative, we have to create a much more efficient capital market, we have to invest much more from a common budget as Europeans and from the private sector. And we have to deliver in parallel our decarbonization because I do believe that climate, digital, growth and job creation are the three pillars of what we have to deliver.

JM: We will go through all of those. But just on that point about the European economy, you had a full-scale attack on it at the Sorbonne where you said it is sclerotic, it is being left behind. Do you think that from the EU’s point of view, that sclerotic economy is a bigger long-term challenge than say, Vladimir Putin?

EM: I think this is clearly linked to what’s happening as well, but we have to completely reset our model. I think now France clearly is one of the leading economy. We are number one in attractiveness. We’ve been number one during the past five years. And if you take job creation, growth, we are one or second in the in euro zone.

JM: Do you think you are being held back?

EM: We are here. Now when I take Europe, and especially the EU, as a whole, but it’s true as well for the UK, we have this issue in terms of business model. Why? Because we had low cost energy thanks to Russia, production thanks to central and eastern European countries with quite low costs, a market for exports, China, and a geopolitical umbrella, US. These pillars are being completely revised, totally, and it’s no more valid. So we have to reinvent. And how? By creating much more value on our own by being much more innovative, by creating much more jobs and jobs with value — good jobs, I would say — on our continent. The key point is deliver much more innovation and productivity policy, public and private. The second key reforms is to accelerate decarbonization and especially our electricity policy because through renewables and nuclear energy we can deliver low carbon, sovereign and low cost energy, which is much more than importing gas and fossil fuels. Third, we need much more investment based on common budget. And my view, I mean based on public reports and figures, we need 1 trillion more in terms of budget, in terms of spending, and in parallel we have to make the capital market union a reality, which is not yet the case.

JM:  Can I come in with capital market union? Because you have here an example. You have BNP, now probably Europe’s and definitely the euro zone’s most successful bank worth $80 billion. But you know, you are entertaining these people like JP Morgan and so on. JP Morgan is worth $550 billion. It’s nine times as big, Bank of America four times as big. And the reason why is BNP Paribas cannot expand throughout the European Union and take over other banks.

EM: This is very true, we have several issues.

JM: You would like, you would like to see BNP take over one of these, take over a German bank or an Italian one

EM:  I mean we do need a consolidation but we do need as well an actual domestic market as Europeans, which is not the case. We have to deal with 27 regulations. You know, in energy, finance and telco are the key sectors where single market doesn’t exist, it was a choice at the very beginning. I do agree that we have now to open this box and to deliver a single market approach which is much more efficient. So our view is that now we want to elaborate a Franco-German consensus on capital market union, to have a single system of resolution, a single supervision, and a much more integrated capital market union.

JM: Would you be happy with, say, Spain’s Santander coming and buying Société Générale as part of that?

EM: I mean it’s part of the market, but dealing as Europeans means that you need consolidation as Europeans you are not so…

JM: So it could be cross border mergers both directions?

EM: Yes, for sure, but this one is for banking union, it’s already on track. Now we have to do it for capital marketing, which is broader and even more difficult. But we started to do so at a political level during the last council and I do believe that we can find a Franco-German agreement. But why? I want you to just understand challenge for us: 75% of our financing as Europeans goes through banks and insurance. So we need much more consolidation, but we need a clear circulation of the savings all around the place. This is the first objective: to be much more efficient and to be sure that our savings will be invested in the right sectors and the right geographies. Second, every year 300 billion savings goes to finance the US economy because we are not attractive. So in parallel with this capital market union and this simplification, having an actual single market, we clearly need the same level playing field as the US in terms of financing. Which means when you take solvency Basel, as long as it’s not implemented by the US competitors, it should not be implemented by the European competitors otherwise this is a killer for risk taking because these regulations just prevent you, I mean our banks, from investing in equity, which is exactly what we need. And if you take the key driver of this difference between the US and Europe, the key driver is the fact that the US economy innovated and invested much more in equity and innovation than the European economy. I think we did much better during and post Covid than what we did during the financial crisis, but now this is a totally new world and we do need this new business model for the Europeans; more innovation, more investment, a single market and capital market union, and a relevant trade policy because I want to at this point. Not the US and China are compliant with WTO today. We are the only one in the room to respect just the regulation of the WTO and we are too naïve, we are too open. Both of them protect their players and their economies. We have to do the same.

JM: Can we come back to the issue, just on another French company, Total, you mentioned energy. Total’s CEO has talked about moving its primary listing away from France towards New York. Would you be happy with that?

EM: Not at all and I would be very surprised. No, I wait for any confirmation. I understood it was rumors. So, we will see

JM: But it’s interesting that it’s tied to the idea that he would face extra ESG measures here that he would not face in America. He thinks that would affect his valuation.

EM: Do you mean that we are more serious than the US in terms of green economy and transition?

JM: Yes. But also in your speech at the Sorbonne, you said, and I’ll paraphrase, you said you cannot let decarbonization and growth be enemies…

EM: Exactly.

JM: … and this would be an example

EM: … and this is my point. But the point is just we have to be sure when we regulate we should not over-regulate. And I think now we have to deliver, we need in Europe much more investment, we have to cut red tape, add more flexibility. But in parallel, everybody has to be serious. I saw a lot of funds, a lot of asset managers saying we are with you on climate change. Where is the beef? Are you sure you are sufficiently compliant? Are you sure you are clearly addressing the same issues? This is my point, and this is why we need the re-synchronization between the US and Europe. The re-synchronization is number one, the US regulation in terms of climate change should be more serious and realign on the European ones. Second, the Europeans have to invest much more and be more serious and realign themselves on the US

JM: Can I just ask you about another French company. I’ve asked you about Total and BNP. LVMH, I looked, and nobody has done better under the Macron presidency than Bernard Arnault. He’s now, his wealth has increased by €170 billion euros and he’s now the richest man in the world, probably the first Frenchman to have that honor since Napoleon. And I think we can both say bravo to Mr. Arnault, he’s done it in a more peaceful way. But it’s interesting, you look at the people who right at the very top are the wealthiest people in France, they’re mostly either heirs or in fashion or both. And I wonder whether that is the kind of France you’ve talked about creating, you always talk about technology, but the people who’ve done really well are these old style businesses.

EM: You’re right, all of them. I don’t think it’s an old style of business, but it’s a business where we have competitive advantage, luxury, fashion and so on because France is one of the great places. And Bernard Arnault consolidated this market very early. He was one of the front-runners in this industry and I think it’s very good, and this is a chance for us, because first we speak about a lot of jobs which are located in France because a lot of these jobs are impossible to be located elsewhere,  when you speak about alcohol, when you speak about cognac, Armagnac, champagne, fashion and making a lot of this stuff, it’s added value. It’s low qualified and very qualified jobs. And in parallel, he consolidated the market elsewhere. And thanks to the fact that he’s listed in France, we consolidate a lot of value and value creation as well. And this is why, thanks to total, LVMH, BNP so on, we are the second largest place of the world to list your company.

JM: But there is a tension, isn’t there, certainly if I look at all those people or certainly Hermès, LVMH, Kering, all those ones, they have done spectacularly well by exporting to places like China. They’ve done very well out of globalization and all the restrictions you were just talking about in terms of Europe having higher trade walls, being tougher with China. You know what will happen in a couple of months time: the Europeans will say, we want to put tariffs on electric vehicles and what will happen is Mr. Xi, despite what he may have told you last week, he will come back and he will put tariffs on cognac and that will help those very successful French business people.

EM: Look, I think this is exactly the mistake we made 20 years ago on solar panels and we killed our industry. I’m very simple, I don’t lecture and blackmail anybody, I just look at the picture. When you have ties of 10 for your electric, for Chinese electric vehicles entering into our markets, and when you are taxed between 15 and 24, when you go to the Chinese market, you have an issue. And on all the different sectors, what we want is just reciprocity. We want, and in fact more than that and regarding the relation with China, level playing field. So what we ask for is exactly that. We want to be sure that in terms of tariffs, subsidies, rules of production, we have a fair competition. And I mention it very openly to President Xi. So it’s not a geopolitical agenda, we don’t want to blackmail and push back some of the production, we want to be sure it’s fair. It’s fair to launch precisely inquiries and look in details at the situation and revise it. If we are weak, if we are threatened by the fact that you can have retorsion measures, you just don’t do what you have to do. We had this discussion and this is why they decided not to implement the first measures on cognac and withdraw the first one. So I think it’s a normal approach. But look at the situation today. The European Union is the most open place of the world, but you cannot survive if at the same time you have subsidies and other-capacities in China and protection in some part of the market, and the Inflation Reduction Act and Buy American Act in the US. It doesn’t fly for on second.

JM: So Europe has got to get tougher?

EM: But this is a necessity, not because we are protectionists, but just because we want to protect our region.

JM The Germans do not agree with you on that.

EM: I think it depends whom in Germany and for which perspective. It’s totally true that some German companies, when they are incorporated in China, for instance, benefiting from subsidies —not just German, European, American — their interest is probably to preserve that and to sell themselves their over-capacities in China to the rest of the world and especially the European market. But the German economy’s interest is totally aligned with the French economy’s interest, meaning creating jobs, creating value, but just protecting your business and your people when they are attacked by unfair measures. And it’s normal, it’s part of the business. So for me it’s just a no-brainer.

JM: It’s a very interesting journey watching you make the French love business more and business love France more. Thank you very much for talking to Bloomberg.

EM: No, thank you, it’s very important. Thank you for being here. I hope you will have the opportunity to discuss with a lot of CEOs and we will continue because business is in permanent evolution given the fact that geopolitics is moving over time.

bloomberg.com 05 13 2024