For Nicolas Sarkozy, the French President, it's revenge time.
Four years ago Paris was the favourite to win the 2012 Summer Olympics. London then came out of nowhere to snatch the games and Paris has been de mauvaise humeur ever since.
But now an even bigger prize than the Olympics is up for grabs - Europe's financial and business centre.
London owns that title and it is unthinkable the city could lose it. Or it was unthinkable until the financial crisis and the recession so rudely interrupted London's party. A combination of tax changes, financial services regulation, gutted British banks, the perceived failure of the Anglo-American economic model, disgust with greedy CEOs and competition from wannabe financial centres is conspiring to deprive London of its greatest industry.
Paris, so far, has emerged as the most serious challenger. But Mr. Sarkozy may be his own worst enemy on this file. The reason: He and his German allies are wholesale supporters of the European Union effort to rein in the hedge funds even though the funds can take little blame for the financial disaster.
If Mr. Sarkozy gets his way, the funds, which are a huge business in London, won't jump on the Eurostar and re-emerge in Paris. They will leave the EU entirely for Switzerland (not an EU member; some funds have already moved there) or any of the financially ambitious Middle East and Asian cities - Abu Dhabi, Singapore, Shanghai - which are dangling gold and pearls before the big-name fund managers.
So far, Paris's weapon of choice to displace London as the business and financial centre comes in the form of infrastructure projects, and lots of them. French presidents adore big legacy projects.
The country's stimulus plan is already focused on infrastructure spending, from cleaning up old cathedrals to refurbishing high-speed rail systems. Mr. Sarkozy's idea, floated in March and confirmed earlier this month, is called "le Grand Paris." It will see some €50-billion ($79-billion) in spending to connect, in effect amalgamate, Paris's outskirts to the centre in an effort to create a modern economic colossus.
The plan would see La Défense expanded. La Défense is the Parisian district, on the western edge of the city, where the headquarters of many of France's biggest companies are located.
While le Grand Paris is on the drawing board, another effort, called Paris Europlace, is already running. The goal of the promotional agency is to turn Paris into an international financial hub. By definition, success means robbing London of its glory. Europlace has already made some progress in making Paris a friendlier place for business. Its lobbying effort did, for example, succeed in eliminating the CIF, the special tax on financial institutions.
London is well aware of the Paris threat. Its standout advantage, of course, is English, the international language of finance and commerce.
The city is also paying attention to infrastructure, whose competitive advantage is never to be underestimated. The biggie is Crossrail, the new, high-speed, high-frequency rail network that used tunnels to link Heathrow airport in the west to the City of London (the name for the financial district) and Canary Wharf to the east.
The bad news? Sadly for London, there is lots of it. Britain is not the gigantic tax haven it used to be, thanks to the clampdown on the "non-doms" - the non-domiciled foreigners who work in Britain and paid taxes only on the income brought into the country. Some rich foreigners are already leaving town. Corporate tax changes, aimed at taxing foreign profits on British-domiciled companies, have not helped. WPP, the world's largest advertising agency, recently moved its legal domicile to low-tax Ireland. McDonald's moved its European headquarters from London to Geneva.
But the biggest threat is the proposed EU clampdown on hedge funds.
London is hedgie heaven. It is home to many of the biggest funds - Barclays Global Investors, GLG Partners, Bevan Howard Asset Management, Man Group, BlueBay Asset Management - whose loss would come as a severe blow to the city and to Britain. Unlike the banks, which are burdened with massive amounts of infrastructure, the hedgies are mobile. They could close the door in London and reopen in Switzerland the next day.
The proposed regulations would force the funds to register and disclose information to regulators. Leverage levels would be capped. London Mayor Boris Johnson is campaigning hard to take the teeth out of the proposed regulations. He has said they would "strangle" London's financial industry and he might be right. If the hedgies leave, the venture capital and private equity funds may not be far behind.
Poor, deluded Mr. Sarkozy. He obviously doesn't like hedge funds, the pointy end of what he has criticized as "financial capitalism." His German colleagues are equally impolite about hedge funds. Certain German politicians have dubbed them "locusts." London's job is to convince the French and the Germans that losing the hedge funds would hurt all of the EU, not just London.
If London succeeds in taming the French and the Germans, it has a better chance of retaining its financial-centre title. If it fails, and it could, London's glory days as Manhattan's main rival are surely over.
Eric Reguly