April 13, 2012 / 1:21 PM / in 6 years

No reason for market attack on France after vote: Noyer

PARIS (Reuters) - Bank of France Governor Christian Noyer said on Friday he saw no reason for markets to target France in the wake of the presidential election provided the next government focuses on deficit reduction.

President Nicolas Sarkozy said this week victory for his Socialist rival Francois Hollande, who leads in opinion polls for the May 6 runoff, could lead to a crisis of confidence in France.

Noyer appeared to play down that possibility but warned that he stood ready to fight any speculation against French debt.

“What is necessary is that the government installed in the next parliament must be very clear about its pursuit of deficit reduction,” Noyer told a news conference to present the 2011 results of the Bank of France.

“In the euro zone, each time there have been modifications to the stated (deficit) path it has been the source of tensions,” he said, adding the market’s attention was focused on the first few years, not long-term deficit forecasts.

Hollande, who has talked tough on banks and proposed a 75 percent tax on those earning over 1 million euros, has said he will meet France’s European Union commitment of a 3 percent deficit by 2013 and balance the budget by 2017 - just one year later than Sarkozy.

Noyer said: “If the clarity, persistence and priority of the (deficit reduction) path is affirmed, there is no reason why France in this regard would be the subject of a loss of market faith.”

Noyer also noted that a futures contract on France’s long-term OAT bonds, due to be launched on April 16 by derivatives exchange Eurex, could improve liquidity and lower borrowing costs, but he warned against any speculation.

“In general terms, anything which is a speculative movement against French debt is something which I will fight with determination should it appear, which I don’t think it will,” he said.

He said he had seen no slowdown in the offer of credit to businesses in France by banks, but rather to demand for loans, particularly in the mortgage market.

Noyer also played down concerns over the euro zone’s Target2 transfer system, saying imbalances here reflected deficits within the current account of member states which should be addressed by reforms to improve competitiveness.

He said the tendency of banks to purchase their own national debt - a “nationalization of savings” - was due to market pressures on certain euro zone sovereigns and should be a temporary phenomenon.


The Bank of France reported a 2011 net profit of 1.570 billion euros, down 989 million euros from the previous year. It used increased revenues generated by non-conventional monetary policy operations to build up its capital in the face of increased risks linked to its monetary policy operations.

“We have good resilience in our balance sheet despite the increase in its size,” he said.

The bank raised its capital to 9.73 billion euros at the end of 2011, up by 2.94 billion euros. He noted that the Bank of France had neither sold nor purchased debt last year.

“Even if (central banks) have been extremely careful about the assets they have purchased or taken in guarantee, the strengthening of their financial structure is more necessary than ever,” the bank said in a statement.

The French central bank said it would pay the state a dividend of 877 million euros, in addition to corporate tax payment of 2.01 billion euros.

Editing by Janet Lawrence

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