“The IMF should be an alert system, not just a financial fireman”
IMF frontrunner Christine Lagarde in exclusive interview with Metro.
When she met with Metro for an exclusive interview at France’s Ministry of Finance, Christine Lagarde wore a dress suit in bright yellow – the color Queen Elizabeth wore at Prince William and Kate Middleton’s wedding this spring. It promptly turned into a fashion trend.
Lagarde herself is about to become Queen of International Finance. Since Dominique Strauss-Kahn’s resignation, the no-nonsense former lawyer– who has also headed France’s Ministries of Trade and Agriculture – has overcome international doubts about appointing yet another French national as Managing Director of the International Monetary Fund. She’s now the EU’s official candidate. Developing countries have lobbied for one of their representatives to get the post, but have so failed to unite against one.
And Lagarde seems to like the prospect of living in Washington, where the IMF is based. She asked Metro’s reporter, a former Washington resident, about the best neighborhoods to live in – and she wants to live in one where she can ride her bike to work.
Assuming that you’re elected Managing Director of the IMF, what can we expect from you in your new role?
The IMF has two specific tasks: oversight and assistance. I want to focus on those two roles. They have to be developed so that they’re relevant and responsive to the needs of the members. The IMF belongs to its 187 member states. I want it to be relevant to all of them. Some of them – in Africa, Latin America and Europe – have particular needs, and they should continue to receive that kind of support. Receiving IMF assistance shouldn’t be a stigma. But all countries are beneficiaries of the IMF’s surveillance mission, including its early-warning system, which was improved by the IMF’s previous Managing Director. I don’t see the IMF as the bad cop. I see it as an institution that delivers the best possible services to its members.
How do you view the current global economic situation?
There’s an asymmetric post-crisis recovery. China, Brazil, India and some African countries have 5-9% growth rates. Developed countries like the US, Europe and Japan, on the other hand, have much slower growth rates and slower recovery. If I look at the global situation, developed countries are clearly focused on sovereign debt, but we shouldn’t generalize. Sweden, for example, is doing incredibly well. Their growth rate is amazing and the level of indebtedness is extremely reasonable, and yet it’s part of the EU, where everybody complains about the sovereign debt crisis.
If you look at other parts of the work, the major concern is not debt but inflation and the price of commodities, which is skyrocketing. In China food prices have risen around 10% in the past month alone. I was in Cairo last week, and there the price of wheat is a big concern.
One concern that most countries share is how to create jobs, especially for young people. If I had to single out one objective, it would be that one. We have to make sure that we can create enough jobs to give young people the expectation that there is hope for them in the world. It’s a little bit far-fetched and it sounds a bit like a grand dream, but at the end of the day you have to ask yourself what you’re spending 15 hours a day on. But I think to myself, if we all work in the same direction, we can find solutions for young people both in the developed and the developing world.
Speaking of youth unemployment, there’s lot of concern about exactly that in the PIGS (Portugal, Ireland, Greece, Spain) countries. Can the IMF help them if they’re not able to deal with such structural problems themselves?
The IMF has to help them address those structural problems. Portugal, for example, has agreed to reform the labor market. It’s a fact that mobility doesn’t exist in the Portuguese labor market. And one of the things Portugal has committed to do as part of their reform program is making the job market more mobile. The IMF can say, “we’ll help you, but in exchange, you are going to do this and that”. It’s same thing with Greece. It was a structural reform, and that’s were the IMF can help.
You’re the EU’s candidate, and EU countries are large IMF borrowers. Isn’t that a conflict of interest?
The moment I become elected, if I’m the one, I don’t represent a country or a group of countries. I’m there for the entire institution and I have to dissociate myself from my home turf. Obviously, I’m familiar with the landscape, the people in charge and I took part in some of the discussions. But from that moment on, my interest is not my territory or my home.
Developing countries say it’s time the IMF Managing Director came from their ranks. What’s your reaction?
I think anybody should be allowed to be a candidate. And I don’t regard myself as the European or the French candidate. I’m a candidate. The process is open, transparent and it should be merit-based. I can’t be blamed being European, not can anyone be blamed because they’re from an emerging country. Their time will come, I’m sure.
The EU plans a new law that would force companies to hire female executives. Do women make better leaders?
I have to be careful here, because I’m known to have complained about too much testosterone, particularly in trading rooms. But it goes back to a point that is critical to me about the IMF: diversity. If you only have one gender represented, it’s a weakness. You strengthen an organization by making it more diverse. Sometimes you have to push for more diversity, because it doesn’t happen by itself.
A couple of years ago, would the global financial landscape have benefitted from more diversity?
Absolutely. Women bring a different set of values. People should be valued on their respective merits, but there shouldn’t be any exclusion. In many instances, women are still not readily accepted at the table.
Greeks are rioting because of the austerity package…
Under the current situation, Greece could not refinance itself. It had to seek help from the international community. The EU and the IMF responded. But they have to help themselves as well, and sort out their financial situation, reduce their deficits. Obviously it requires efforts. It means more tax collections, which were very bad in Greece. They have to start the privatization they’ve planned. If you’re doing fine and don’t need anybody’s money, you can do what you want. But if you need backing, then the person who backs you up is expecting something in return.
The world is still in an economic downturn. Assuming you’re elected, can you help prevent other economic collapse?
Yes. In fact, that’s part of the IMF’s job to identify where bubbles are forming. Of course, countries have to listen to the IMF, too. Before 2008 there were reports by the IMF warning about a collapse. That’s why, in addition to skilled staff, the IMF needs a Managing Director who is politically astute and tell governments, “watch out, something is boiling here”. The IMF shouldn’t just be the fireman. It should also be an alert system.
So the previous IMF leadership failed to be such an alert system?
It did observe problems, but it made mistakes, and it acknowledged making mistakes.
The reason you’re about to assume leadership at the IMF is the DSK scandal. How has it changed the political culture in France?
It has made women stronger. It has given women the confidence to speak up and be respected.
Have you received advice from Dominique Strauss-Kahn about how to run the IMF?
Name: Christine Lagarde
Background: Graduated from law school (Paris X), Master’s degree from the Political Science Institute in Aix en Provence. Lawyer with international law firm Baker & McKenzie; rose to Chairman of the firm’s Global Strategic Committee.
Political career: Appointed Minister for Global Trade in 2005; later Minister for Agriculture and Fisheries. Appointed Minister of Finance and Economy in 2007.
Family: divorced; two sons
Fun fact: former member of France’s national team in synchronized swimming
In the news: frontrunner to become Managing Director of the International Monetary Fund