Wednesday, October 17, 2012

A Perennial: Jouyet to Head Public Investment Bank

As if to underscore Hollande's remarks that austerity is not enough (see previous post), Prime Minister Ayrault has announced the nomination of Jean-Pierre Jouyet to head the Public Investment Bank. Jouyet is an old Europe hand: he handled Europe under Jospin and then again under Fillon. France seems to favor such perennial technicians in key economic policymaking positions.

As for the Banque Publique d'Investissement, you may recall that it was originally to have been the Banque Européenne d'Investissement, but Germany and France did not see eye-to-eye on the project, so now it is a France-only bank, seriously undercapitalized, and unlikely to accomplish much beyond financing the pet projects of regional party bosses. Or am I too cynical? There is no shortage of loanable funds in existing banks. The problem is a shortage of projects for which banks are willing to lend in the current climate of deficient demand. So creating a public bank to lend to enterprises that private bankers consider too risky has obvious dangers.

2 comments:

FrédéricLN said...

" financing the pet projects of regional party bosses. "

Well, the good think is that Mr Jouyet would not be keen to such financing. The risk might have been much higher with other heads, coming from, say, la "première gauche".

Anonymous said...

Also, there may not be a shortage of loanable funds, but many banks won't use them for small businesses. I have personal examples for 3 companies that were not only solid, but had a hefty "carnet de commandes", for which they needed funds to hire more employees to respond to demand/buy more modern machines. The applications were turned down. I repeat: the companies were sound, they had definite, actual orders coming in, customers, sound production values, and were about to hire workers, and yet they were turned down for small loans. Ther was NO risk. Absolutely none and the bank admitted so in one case. But somehow it just wasn't worth their while. How the BPI will function is another matter. But it IS needed. If only so that French banks can see investing in small businesses is as useful and profitable as investing with Vinci, Veolia, etc.