SocGen's Oudéa sees a more united Europe despite Brexit threats
Frederic Oudéa tells GlobalMarkets that a more integrated eurozone would be a way of showing the world that it was making progress in efficiency and capacity to stimulate growth despite the upheaval caused by Brexit and migration.
Frédéric Oudéa, chief executive of Société Générale, expects the eurozone to press ahead with integration — fixing some of the weaknesses in the institutional design of the bloc, and helping Europe deal with challenges such as the UK’s exit and migration. But a paper from the German finance ministry on Monday is more sceptical.
“What we might see next year is a milestone in the construction of a more united and integrated eurozone, a structural response to the question of how to maintain a common monetary policy in what are still divergent economies, and encourage more convergence and more integration of the eurozone economies,” Oudéa told GlobalMarkets. He added that it would be a way to show the world that the eurozone was making further progress in efficiency and capacity to stimulate growth.
“There’s a political willingness to ensure the eurozone appears an area of stability, security and prosperity.”
He explained: “The new package could include capital markets union, but also new initiatives in infrastructure spending, ways to create a more competitive environment for European companies in energy or telecoms for example, as well as improvements to the governance of the eurozone, such as a European IMF.”
Emmanuel Macron, France’s president, outlined just such a future in a speech at the Sorbonne University in September, calling for harmonised corporate tax, an expanded EU budget and an EU finance minister, as well as a host of other changes such as a carbon tax, common European border force and integrated EU defence capabilities.
But a paper circulated by the German finance ministry on Monday was more sceptical. The document is much narrower in its focus than Macron’s speech, but questions the need for common backstops to the Banking Union, and rules out any form of debt mutualisation.
“Do we need another new and intergovernmental fiscal capacity?” asks the German paper. “Not necessarily. The EU budget is under review anyway and members are expected to contribute more in future times to compensate for the Brexit.”
Société Générale will be hit to some extent by Brexit — it has more than 3,000 staff in the UK, earned €1.7bn there last year, and plans a move to a new Canary Wharf HQ in 2019 — but the UK’s exit from the Union may encourage the EU to take a broader look at how to manage banks and capital markets.
“This milestone will take place at a time when the negotiations around Brexit enter a critical phase,” said Oudéa. “There will be a need to think strategically about the financial system in Europe over the next 10 years, to figure out the best way to finance the economy and to find a more balanced way between the banks and the capital markets.”