Are we seeing the unpicking of the global order that has facilitated the spread of peace and prosperity? “Globalisation and open trade have been topics on which global leaders have agreed for a long time. But now there is increasing support for political parties that question this, so we need a debate and must explain the benefits to citizens,” said Gramegna. “We must take the time to do this work. And we must make sure that the benefits of trade reach everyone,” he added.
Don’t over dramatise a tragedy
He described “a drama, a tragedy” unfolding over Brexit, as words fly between politicians and commentators. This tension is “making it look a more difficult challenge than it is,” he said. Throughout the last nine months, Luxembourg’s strategy has been to talk about maintaining a “partnership” with the UK financial sector, rather than aggressively pitching for business.
That said, he contradicted the optimistic claims of Boris Johnson, the UK foreign secretary: “You cannot have your cake and eat it regarding EU membership. You can’t walk out of the EU and retain all the advantages of the EU single market. It is impossible for logical and legal reasons as the UK will have different rules and different regulations.” However, Gramegna recognised that London will remain a major partner for the Luxembourg fund industry.
A winning strategy
Luxembourg’s plan seems to be working. “In the reorganisation after Brexit we have had some success and there is more to come,” said Gramegna with a tone of quiet satisfaction. The fund manager M&G Investments has already announced they would redomicile UK funds in Luxembourg, with market leading firm Blackstone heavily rumoured to follow. American insurer AIG is also coming.
“This success has made some competitors envious, but that is is life,” noted Gramegna, apparently commenting on grumbles coming from Ireland that have suggested Luxembourg is not fighting fair. The talk is of the grand duchy cutting corners on regulation.
According to Gramegna, the CSSF, the grand duchy’s financial regulator “has an ear for innovation and will be flexible where international laws and regulations permit: the aim is to help firms serve clients the best they can.” By way of illustration of regulatory rigour, he mentioned how the CSSF is reviewing the international structures of each of Luxembourg’s more than 140 banks.
He said this move was in light of the Panama Papers furore. Also, businesses moving here “can’t do that with a letterbox company,” and that real business has to be conducted from here.
Respond to harsh words with calm words
He also sought to calm fears about Trump, the US president. He recognised the worries about promises to change the rules of global trade and the approach to climate change, but said “nothing has been done yet.” This is not to say that the world can sleep easy, because “open trade can’t be taken for granted any longer. This is worrying for Luxembourg because we are trade champions.”
Nevertheless, Gramegna told the Alfi conference, “we have multilateral rules and it would take time even for the most powerful country in the world to change these rules.”