Overarching ambition : SARKOZY

Behind the glass- and marble-clad great arch of La Défense - built at the behest of François Mitterrand two decades ago - another French president is preparing an even more ambitious grand projet for Paris.

Nicolas Sarkozy is planning a massive expansion of the business district on the north-western edge of Paris to challenge the City of London as Europe's pre-eminent financial centre. In spite of his tirades against financial capitalism, Mr Sarkozy wants a bigger slice of the business.

The blueprint for La Défense - which includes several spectacular skyscrapers and, eventually, a further 1m sq m of office space to the west of the arch - lies at the heart of Mr Sarkozy's plans for le Grand Paris : a vast programme of infrastructure improvements and governance reforms that he hopes will turn Paris into Europe's economic powerhouse.

The French government is intent on taking advantage of the City's woes and its battered reputation to turn Paris into a competitive financial centre. "It is clear today that the City is in great difficulty and that is an opportunity for France to reinforce its financial attractiveness," Patrick Devedjian, the minister in charge of La Défense expansion, said last month. His ambition was to turn La Défense into a "great financial centre, rival to the City of London".

Industry heads are more cautious in their expectations. Georges Pauget, chairman of the country's banking federation, says: "The measures taken by the government [to promote Paris] are right but, although the financial crisis presents a real opportunity to change the relative weight of Paris, it is unlikely they will result in a major transfer of business from London."

Gérard Mestrallet, the chairman of GDF Suez who also acts as chairman of Paris Europlace, a lobbying group, prefers to talk of "narrowing the gap" with the City. Arnaud de Bresson, Europlace managing director, says the French capital wants to operate alongside London with the aim of making Europe a strong financial centre to rival New York today and Asian centres tomorrow. "Politicians have their way of saying things. But we are businessmen and our job is not to come up with magic formulae but to think of the best way to advance Europe as a financial centre," he says.

Paris's heyday as a financial centre was in the late 19th century, when the strength of the Bank of France attracted gold reserves, but the capital's influence weakened after the first world war. Today, the contribution of financial services to the economy is 4.8 per cent, compared with 7.6 per cent in the UK. The industry is an important employer in both cities, accounting for 8.9 per cent of the workforce in the Ile-de-France region and 9.3 per cent in greater London.

Yet there are few business lines in which Paris can claim dominance. In asset management France is the leader in Europe, with a 21 per cent share of the €5,181bn ($7,390bn, £4,464bn) of European funds under management, against the UK's 17 per cent, Germany's 18 per cent and Switzerland's 7 per cent. It also has significant strengths in corporate bonds and equity derivatives, thanks to the market leadership of Société Générale and BNP Paribas.

But Paris trails London in most other financial services. It has little foreign exchange activity and the debt markets - even euro-denominated - are concentrated in London. "We are very far from being a first-rank financial centre such as London or New York, but Paris has a privileged place in the second division," says Noël Amenc, professor of finance at Edhec business school.

The government is nonetheless determined to take advantage of London's misfortune and believes the financial crisis has revealed Paris's under-appreciated strengths. It extols the virtues of a banking industry once derided as old-fashioned but now admired for its resilience, thanks to a universal banking model that combines investment and retail banking.

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Building La Defense, the modern complex of tall office buildings outside of Paris was a stroke of genius on the part of Mitterand, and I suspect,Jack Lang. It created a modern, growing business complex without compromising the essence of historic Paris, which stretches from Roman Times to the 19th century.

The Arch of La Defense is the crowning finale to the architectural perspective that begins at La Carousel, Place de la Concorde, passes through the Arc de Triumph rolling out through Les Champs Elysees out to La Defense in the distance.

QUARTIER DE LA DEFENSE PARIS

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