Euro reforming

France's banking chief soothes German concerns

FILE PHOTO: Bank of France Governor Francois Villeroy de Galhau
I see you, Germany. Source: Reuters

François Villeroy de Galhau isn’t just a fluent German speaker. He also seems to have some understanding of Germany’s mindset, particularly its fear of becoming Europe’s piggy bank. And the head of France’s central bank, the Banque de France, is keen to use that skill to soothe the minds of Germans skeptical of euro-zone reform.

He backed as a “significant step” a Franco-German proposal for reforming the euro zone that was reached last month between President Emmanuel Macron and Chancellor Angela Merkel. He also pushed for the entire 19-nation currency bloc to pick up the pace. “Now or never we need to strengthen the euro zone together,” he said in an interview with Handelsblatt. Rather than wait for the next crisis, as is Europe’s usual modus operandi, “let’s not wait until the end of the current economic upturn,” he suggested.

That doesn’t mean Mr. de Galhau, a voting member of the ECB’s governing council, expects a downturn to come any time soon. He pointed to the ECB’s projections that “robust” growth is still expected for the bloc, although conceded that “protectionism would be a threat to that.”

To Germans fearful that they will foot the bill for any future downturn, Mr. de Galhau had a simple reply: Euro-zone reforms are “a good answer to a German concern that I share: that monetary policy, as the sole answer to a new downturn in the euro zone, would be overwhelmed.”

Such arguments are aimed no doubt at conservative German policymakers. The euro-zone reform package, which opens the door to a common budget and a greater backstop for member countries in crisis, has left some Germans fearful that risks are being shared too broadly – and that the German taxpayer will foot the bill for any downturn. But many here are equally fearful that the European Central Bank, under Mario Draghi, has taken on too much responsibility.

Mr. de Galhau, who has headed the Banque de France since 2015, made clear he shares both concerns. The ECB needs politicians to help take the load off, but the euro zone should “strengthen other economic policy instruments in Europe without implementing transfers at the same time,” he said.

Mr. de Galhau offered another olive branch to Berlin, which he was visiting on Wednesday. A European-wide deposit insurance, pushed by France but rejected by Germany’s financial community, can wait. He urged policymakers to get another plank of the so-called banking union right first: a mechanism for winding down banks in crisis. Common deposit insurance is “less urgent if the second pillar of the restructuring is standing,” he said.

Thomas Hanke, a correspondent for Handelsblatt in Paris, and Frank Wiebe, who leads Handelsblatt’s monetary policy coverage in Frankfurt, conducted the interview. Christopher Cermak in Berlin adapted the interview for Handelsblatt Global. To contact the authors:, and

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