It is illogical that the euro zone's main financial centre should be in London, which sits outside the single currency. Christian Noyer is dead right about that. The governor of the French central bank thinks the world's second-largest economy shouldn't be conducting most of its business offshore. The European Central Bank has the same view. But logic and finance don't go well together.
Trading centres develop out of a magic combination of effective regulation, ample capital and that nebulous buzz which economists call network effects. London developed all three during the decades that continental European leaders showed more suspicion than enthusiasm about the financial trade.
Economists can argue whether the U.K. economy as a whole has benefited from London's status. Financial and related service exports are a plus, but the easy access to foreign capital may have contributed to the country's housing bubble. Either way, the natural tendency will be for the City of London to retain its leading position for years to come unless a real effort is made to undermine it. The British will have to mess up, or be forcibly excluded.
True, many think both are happening. Mega bank bailouts have crippled the U.K.'s balance sheet, and a culture of banker-bashing means makes London is less of a draw to international financiers. The fear that London could be regulated out of business is understandable as the euro zone progresses, albeit slowly, toward a banking union.
But the U.K. isn't so stupid as to surrender its main employer without a fight. And whatever logic may dictate, predatory moves by France or Germany to poach business from London would could be deemed against EU rules.
Euro zone governments should be wary of undermining the idea of offshore hubs as they seek to get a larger share of the finance business. Mr. Noyer's complaint about London came during a trip promoting Paris in Asia – as an offshore trading centre for trading the Chinese yuan.