The financial capital of the Eurozone
“Luxembourg is not just strong because of its investment fund industry, it has many pillars”, Luc Frieden, Luxembourg’s Minister of Finance, said at the ALFI Global Distribution Conference in collaboration with NICSA and HKIFA in Luxembourg, where 750 delegates from the fund industry are registered. To Mr Frieden, ESM, the new mechanism to stabilise the Eurozone, is the best proof that Luxembourg has become the financial capital of the Eurozone. The ESM, which starts next month, has set up its headquarters in the Grand Duchy.
“The conference takes place at a difficult time; this is true for my country and even more so for most of the other countries in Europe”. Finance Minister Luc Frieden is positive that the governments of the Eurozone are on the right path but far from being out of the woods. The national political decision makers have improved the new framework in order to get the Eurozone back on the growth path but now the different member states are in a period of implementation. He praises the efforts of the governments of Ireland and Portugal, which so far have done the best with implementing the austerity programmes. He adds that the situation of Spain and Italy has to be monitored closely but he thinks think that both countries have undertaken a number of impressive reforms in order to have a stronger economy.
“In the short term, these measures will be painful, but in the long term, they will help these countries to recover and become stronger. But it will take some time; these measures will be fruitful in five or ten years. The euro as such is not in jeopardy, nobody questions it; the euro is much more than just a currency, it is an instrument of integration and we work together to maintain peace, stability and prosperity”.
Looking at the recent figures, one can see that there is a gradual economic recovery in the Eurozone that is certainly slower than expected a few months ago. At the same time, Minister Frieden, who is in charge of the financial centre, sees a positive aspect for an international financial services centre such as Luxembourg. “In the broader global environment the country becomes less dependent on the European market. There are billions of people that live in parts of the world that are growing faster than Europe. So let us make sure in our global environment that we all benefit from that growth”.
Talking about opportunities, he is confident that the Alternative Investment Fund Managers Directive (AIFMD) represents a new opportunity for Luxembourg and for Europe. It is the first time that there is a regulated environment for alternative investments worldwide. “I want Luxembourg to play a key role in that area. That is why I presented a draft bill in the summer that will hopefully be adopted by Parliament before the end of the year”.
Minister Frieden deplored that too many governments in Europe only look at their local markets. Luxembourg has a different philosophy when doing business; the country looks at the international markets. That is also Mr Frieden’s attitude in his discussions on a banking union in Europe, on which he has mixed feelings. “On the one hand, we need more cooperation and more European instruments for an integrated market for financial services. European products and services have to be distributed throughout the world, which is why we need to strike the right balance between supervision in Europe that does not jeopardise what we have constructed so far in the single market”.
If the European Central Bank undertakes supervision for a banking union, Luc Frieden wonders what the responsibilities of the national supervisors and what the consequences of the decisions taken by the European supervisor will be. The minister encouraged EU Commissioner Michel Barnier to come up with a proposal on the banking union that is more complete and that takes into account the questions that still persist. Last but not least, he promised that the government would do everything to obtain pragmatic regulation that supports the growth of the fund industry. CW