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Cablegate: Bankers Share Discontent

This record is a partial extract of the original cable. The full text of the original cable is not available.

161142Z Dec 05

UNCLAS SECTION 01 OF 02 PARIS 008490

SIPDIS

SENSITIVE

PASS FEDERAL RESERVE
PASS CEA
STATE FOR E, EB, EUR/WE
TREASURY FOR DO/IM SOBEL, RHARLOW, LHULL
TREASURY ALSO FOR DO/IMB AND DO/E WDINKELACKER
LABOR FOR ILAB - WBRUMFIELD
USDOC FOR 4212/MAC/EUR/OEURA

E.O. 12958: N/A
TAGS: EFIN ECON PGOV FR
SUBJECT: BANKERS SHARE DISCONTENT


SENSITIVE BUT UNCLASSIFIED, NOT FOR INTERNET

1. (SBU) SUMMARY: Several senior French bankers have
emphasized to the Ambassador their frustration at the slow
pace of French structural reforms, albeit with grudging
admiration for the efforts of Finance Minister Breton. They
forecast continued weak GDP growth in 2006, and note the
importance of 2007 elections for France's economic future.
END SUMMARY.

2. (U) On December 12, the Ambassador met with BNP Bank CEO
Baudouin Prot, and on December 13, with Lazard Bank
President Bruno Roger, to discuss the banking sector, the
economy, and the political landscape. In France, the
banking sector is dominated by six banks, of which BNP is
one of the leaders in the retail banking sector, and Lazard
in investment banking. BNP Paribas is the largest French
bank and the second largest Euro-zone bank in terms of
market capitalization. In 2004 it ranked 48th on Fortune
Magazine's list of the world's 500 largest companies, above
Deutsche Bank, Bank of America, UBS, and JP Morgan. It
gained notoriety for its role in the UN oil-for-food program
for Iraq. BNP has an important U.S. presence in the western
U.S. and Hawaii.

3. (SBU) For BNP, CEO Prot noted that 2007 elections in
France are crucial to the pace of future reform and economic
growth. Prot had grudging praise for Finance Minister
Thierry Breton's efforts, particularly his "excellent
proposal" to reduce France's wealth tax to 40 percent and
cut other taxes. Reform efforts overall are constrained by
the current political situation, however, and France must
vote for reform in 2007. Like many of our senior business
contacts, Prot believes that Nicolas Sarkozy offers the best
hope for change. In Prot's view, "economic patriotism"
should mean market-oriented economic policies that bring
growth.

4. (SBU) Lazard President Roger expressed disappointment
with the Chirac government, noting that he should have
capitalized on his overwhelming victory to push through
needed reforms. For Roger, the number one priority is labor
reform, specifically to undo the 35-hour workweek. Tax
reforms, and reduction of the size of the French government,
are also needed to stimulate French GDP growth rates beyond
the 1.5% forecast for 2005.

5. (SBU) For the banking industry in particular, the
recent decision by the European Central Bank (ECB) to raise
interest rates casts a shadow over growth prospects. Roger
commented that he has known Jean-Claude Trichet, the ECB
Chair, for a long time, and had invited him to lunch a few
weeks ago to try to dissuade him from raising interest
rates, but Trichet has a deeply ingrained contrary streak.
The ECB is obsessed with inflation fears, due to the rise in
energy prices, and so growth throughout Europe is certain to
suffer as a result.

6. (SBU) Regarding the political landscape, Roger appeared
not too concerned about whether the left would return to
power in 2007, arguing that despite their public
pronouncements, all the potential political candidates would
follow more or less the same economic policies.

BIO NOTES:

7. (SBU) Baudouin Prot (DOB 24 May 1951) has been CEO for
BNP Paribas since March 2000, when he was first elected to
BNP's Board of Directors. He is also a Director of Pchiney
Veolia Environnement, a member of the Supervisory Boards of
Pinault-Printemps-Redoute and Cetelem, and the permanent
representative of BNP Paribas on the Board of Accor. He
speaks English well, if not fluently, and has an American
spouse. He is well-disposed towards the United States, and
a believer in France's European future.

8. (SBU) Bruno Roger, (PDOB August 6, 1933; Boulougne-
Billancourt France), joined Lazard in 1954. He has been
President of Banque Lazard Freres since 2002; Managing
Director and member of the Global Executive Counsel of
Lazard LLC in New York since 2000; and Co-President of the
European Board of Directors as well as Chairman of the
Global Investment Bank of Lazard since 2005. Within the
Lazard Group, he is a member of the Supervisory Board of
Eurazeo (having been Chairman until July 2003). He is also
a Director of Cap Gemini Ernst & Young and of Sofina
(Belgium), and a member of the Supervisory Boards of AXA and
Pinault Printemps Redoute. He completed his term on the
Board of Directors of Saint-Gobain in 2005. He is widowed
from his first wife, Madeleine Simon, with whom he had two
children. He remarried in 1996 to Martine Aublet. He
speaks fluent English. He appears to be in relatively frail
health, and so our guess is that he probably will not remain
at the helm of Lazard Bank very much longer.
STAPLETON#

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