Banque de France Governor Emmanuel Moulin warns that a potential crash in U.S. artificial intelligence valuations could trigger a contagion effect across European markets. Speaking at the third edition of the World In Progress colloquium in Barcelona, Moulin explained that Europe would not emerge unscathed from a “fall” in AI values in the United States.
Risks of AI Market Contagion
During a discussion involving central bankers, the Governor highlighted the potential for the artificial intelligence revolution to impact broader economic stability. The conversation, moderated by Lucía Abellán, included insights from Bank of Spain’s José Luis Escrivá Belmonte and former ECB Vice President Luis de Guindos. While the discussion touched upon various economic pressures, Moulin focused on how a collapse in American AI stocks could cross the Atlantic to affect European interests.
World in Progress Colloquium
The event, held on November 2 and 3 in Barcelona, serves as a Spanish-language equivalent to Davos. Organized by the Prisa group, which owns the daily newspaper El Pais, the colloquium featured high-level attendees including Spanish Prime Minister Pedro Sanchez and various South American ministers and former ministers. Joseph Ougourian, the main shareholder of Prisa and a French national, organized the gathering. Other notable participants included former French Prime Minister Edouard Philippe, French Justice Minister Gérald Darmanin, and Banque de France Governor Emmanuel Moulin.
Addressing the broader economic debate, Andrés Velasco, a professor of political economy at the London School of Economics and former Chilean Finance Minister, summarized the current market dilemma, stating that either Wall Street is blind or the world is witnessing a “gigantic economic revolution.”
Moulin Addresses French Interest Rates and Budgetary Anxiety
In addition to AI market risks, Moulin addressed the current economic climate in France. When questioned about French interest rates, which sit at nearly 5% compared to Spain’s 10-year rate of 3.8%, the Governor noted that “there is indeed a certain anxiety due to the budgetary and political situation.”
Despite these concerns, Moulin expressed confidence in the legislative process, stating it is very probable that there will be a budget.
He suggested that markets may have engaged in a “overreaction” due to complexities regarding constitutional procedures, such as Article 49.3 and ordinances, which could allow for the adoption of finance laws without a parliamentary majority. He maintained that while a budget is expected, it is indispensable to reduce the debt.
While Escrivá Belmonte pointed to French debt levels, he noted that the United States and Japan are facing similar difficulties. Spanish Finance Minister Arcadi España García also commented on the situation, describing France as a “fiscal hell.”
Central Bank Perspectives on Inflation
The colloquium also highlighted diverging views among central bankers regarding inflation and interest rates. While Moulin characterized the indirect effects of rising energy prices as “moderate,” Escrivá Belmonte expressed more hawkish concerns. The Bank of Spain official noted that price disruptions linked to the war with Iran are more significant and lasting than expected, increasing the likelihood of indirect effects such as inflation impacting wage costs.
