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10th Apr 2020

French finance chief joins Vatican attack on markets

  • Stairwell in the Vatican museum. The church's own bank is one of the world's most opaque and least regulated in the world (Photo: Jon Himoff)

France's top financial regulator has told bishops he shares the Vatican's view that financial markets are out of control and need central regulation.

Jean-Pierre Jouyet, the head of the French Financial Markets Authority, laid out his views at a yearly meeting of 24 senior Roman Catholic bishops in Brussels on Thursday (27 October), a few hours after EU leaders finished their anti-crisis summit up the road.

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He described derivatives markets as a vast, opaque structure which has lost touch with reality and which is eroding fundamental values.

Citing the example of the Chicago Mercantile Exchange, which last year traded wheat futures contracts worth 46 times the world's actual production of wheat, Jouyet said: "This [system] has changed our relationship to money, which has become an absolute value and the measure of all things."

He added: "More seriously, states have increasingly fallen under the control of markets, as this crisis shows. We have to constantly react to market expectations, to reassure the markets ... States, politics must regain control of things."

In terms of concrete policies, Jouyet said euro-using countries should establish joint economic governance despite the "unease" of non-euro EU members over a "two-speed" union or resistance among EU voters to a "federal leap."

He added the EU should "strengthen" the powers of its new banking and insurance regulators - the Paris-based Esma, the EBA in London and the Frankfurt-based Eiopa. He backed European Commission proposals to gag ratings agencies and to create a tax on financial transactions. And he said banks should be split into normal lenders and speculators.

He also endorsed Vatican ideas on how to deal with traders and globalisation. "In this regard, the Pontifical Council for Justice and Peace is right to emphasize in its latest report the need to strengthen global governance," Jouyet said.

The Vatican report on Monday urged the G20 and the UN to create "a kind of central world bank" to discipline markets and, later on, a world government or "public authority with universal jurisdiction" to promote peace.

The proposal was based on similar concerns to Jouyet's description of the Chicago exchange.

The Vatican paper said: "The crisis has revealed behaviours like selfishness, collective greed and the hoarding of goods on a great scale ... The negative effects that will follow on the social, political and economic level will be destined to create a climate of growing hostility and even violence."

It added the "primacy of politics, which is responsible for the common good" should be "restored" over "the economy and finance."

For their part, the 24 bishops in their joint statement on Friday turned the discourse on its head, saying markets have become what they are because of politics and culture.

"The causes of the crisis are structural and mainly rooted in the short-term and very often electorally-motivated political choices. These choices often reflect individual behaviour of credit-financed consumerism ... populism ... [and] moral relativism," they said.

The Vatican's own bank, the Institute for Works of Religion, is one of the world's most opaque and least-regulated financial bodies. Last year Italian authorities temporarily seized €23 million of its assets on suspicion of mafia money laundering.

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