IMF Managing Director Christine Lagarde spoke to the media on her first day in office in Washington. Here are excerpts of the media encounter.
You might be surprised that I’m here so soon after my election. I thought it was necessary to come back to D.C. very promptly, simply because there are many issues that need to be addressed. Those issues cannot wait for yet another summer holiday. So, here I am and, for good.
Good morning. Madame Lagarde. From what you’ve seen in this very short period of time you had to get acquainted with IMF, what worries you the most?
It has been exactly 24 hours. I’ve had about 18 hours of briefing in those 24 hours, so a little sleep in the meantime. Well, you have the pressing, immediate issues that have to do with sovereign debt. As I said, it is broader than just the euro zone. There is a tendency to focus on the euro zone because it is a mixture of various components that make it more critical and more sensitive, and more difficult to address probably because of this euro sovereignty, yet lack of political sovereignty in one single capital. But it is a very broad based issue that needs to be looked at as a matter of urgency.
The second one, and you know, coming from Brazil, you will be particularly aware of that, is the issue of capital flows, and the fact that as a result of sovereign debt issues and concerns and doubt and suspicion by investors, there is a massive flow of investment to areas of the world that are not wanting that massive flow of investment and are not prepared for it, or fearing the effect on their economies. So, I think it is a combination of these two that are of immediate concern, and that are pressing issues.
I would like to ask about your personal feelings. This would be your third time to — second or third time to come to this area. First you came here to attend the high school. Now, you came back here as the head of one of the most prominent international institutions. So, did you imagine those kinds of things when you were back in high school? And, what is your sense right now, and what is your expectation as head of the institution?
Thank you for the personal question. Unfortunately, you remind me of something which is very cruel, the passing of time that we can’t escape. When I look back, I was here in ’73 and ’74, Washington did not have a Metro. Washington was a reasonably quiet capital, with not a lot of activity, with lovely country clubs. And, clearly, the world has changed massively in the meantime.
Was I expecting that I would return to D.C.? No. I knew I would have something to do in the world on an international basis, because my American Field Service experience brought me up with a wider horizon than just my home town, or even my country. And, I’m delighted to be back. I think the International Monetary Fund has exactly that set of both technical focus, rigor of expertise and analysis, willingness to confront and debate, and desire to then be very specific and in control, with a very, very international background.
I must say, I will keep The Financial Times cover page of today, because it is not so much that I like my smile on the face, but I like the background of flags that really speak for the Fund and its international nature. But, for all the young girls that are in school at the moment, I would like to say that they should each consider that everything is possible.
Congratulations on the new job. You’re obviously from the right, Dominique Strauss-Kahn was a socialist, was and still is, I assume, a socialist. Should we expect any changes in the spirit, the letter or the priorities of IMF policy towards North Africa and the Middle East now that you have taken over?
I tend to be a very practical and down-to-earth person, and not to be either driven or labeled by particular classifications. I think that you have to judge people by what they do, what they propose, rather than what they say. If you look at the map of the world and look at the international socialists around the world, you have a massive range of views and opinions, from the old Marxist/Leninist, to the much more tempered, free-market oriented, so to speak, socialist. I think it is certainly not with that categorization in mind that I address the challenges ahead. And I believe that no one should be earmarked with a particular label.
Some of the things that Dominique Strauss-Kahn started are excellent reforms and I would certainly consult on them, and be very supportive of continuing them. I think I have given you an example, for instance, when I speak of the comprehensiveness that we should adopt, embracing the employment and social issues, as well as the economic trends that are more traditional.
The reforms that he has started, and that have culminated in 2010, are good reforms and must be not only implemented and enforced in all corners of the world, not just a matter of paying lip service to the principle, but making sure that back at home the reforms are implemented, but also pursued. The world is going to continue to change. We have these tectonic plates that are moving at the moment, and that needs to be reflected in the composition, governance and employment of the Fund. And I will continue that.
Because the IMF is about to launch the spillover report soon, I wonder, except for the current, existing mechanisms, what else do you plan to bring into the IMF to monitor the systematically important countries? What other mechanisms?
You are right to mention the spillover reports as one way to address my first C, the connectiveness, the connections between countries, the fact that one particular policy will have ripple effects and consequences outside its territories. And the fact that the IMF has embarked in actually addressing, describing, analyzing them is, I think, important. We need to take stock. We need to see how helpful it is. What we can offer to members as a result of the spillover effects.
Second, in terms of how can we constantly improve what we offer to the Fund. As you know, my colleague and friend, Tharman, the minister of finance for Singapore, who is also the Chairman of the IMFC, has suggested, and I have strongly supported, the proposal that many reports, whether you talk about the standard Article IV, whether you talk about the financial report, whether you talk about the spillover reports, be better aggregated so that there is actually a comprehensive analysis that can be offered to members. I think that would be a very important improvement on the services.
John is also suggesting, and he’s right, there is the triennial surveillance report that is coming out very shortly which will also help us to actually determine how we can improve. For your information, it is one of the comments that we shared with not only the management, but also the heads of departments with whom I plan to work very cohesively. If there are things that the Fund has been doing for many years and it has been like that, so let’s continue, I will say, if it is not useful, if it is not providing value, then let’s drop it, and let us focus our immense resources and massive capital power, brain, on what is going to be useful for the members. It is in that spirit that I begin the job.
Your first IMF Board meeting will apparently be on Greece. What is your strategy to address these sensitive issues for Europe? And my question in French, as you can imagine, is about Dominique Strauss-Kahn. (Interpreted) What is your feelings regarding the last events regarding this case, and are you going to see him in Europe?
The Managing Director: On the first one, there is an IMF Board meeting which is scheduled for Friday at which we shall consider the fourth review and eventually the payment of the fifth tranche that falls due. So that will be, that is scheduled, as I said, for Friday. You will appreciate that I’m not going to share with the press, however I appreciate the quality of your television channel, the conclusions or even the considerations that will take place on Friday.
On your second question, as I said, the most important thing for me is to make sure that the institution actually is proud of its achievements. It has reasons to be proud of its achievements under the previous Managing Director’s helm, and I’m the first one to acknowledge the quality of the work and the quality of the reforms that have taken place.
As to the rest, we shall leave it to the legal course that it should take, and I’m not going to comment further on that.
Madame Lagarde, I want to wish you all the best in your new job. I would like to ask you what are your anticipations, what are your expectations from the Greek government and the major opposition political parties in Greece? How do you assess the social reactions? If you would like to answer to the objections of many analysts which say that since Greece core primary spending is up compared to the last year, the IMF seems to support this creation of deficits? Thank you for your attention.
The Managing Director: Without anticipating on what will be discussed for the Board scheduled on Friday, I would like to say simply that I hope the Greek political parties altogether either in government or in a position, can be rightly inspired by the decisions, the courageous decisions made by political parties in Ireland, the courageous decisions made by political parties in Portugal.
Comes a time when individual interests, political rivalries, should be set aside when it is in the national interest of a country. And that was clearly demonstrated both in the case of Ireland and in the case of Portugal.
In relation to the analysis conducted by the IMF, you can rely on me that the IMF in its judgment will remain independent and will conduct its analysis in such independence.
I would just like to ask how might a possible default and restructuring of Greece’s debt harm European banks. How likely is it that you would support such an approach?
I’m afraid that I’m going to disappoint you because you are going to point a lot of questions on Greece and I’m going to either elude the responses, or be very sanitized in my responses, simply because the matter is under review. The Board meeting is scheduled on Friday. I have a briefing this afternoon on Greece. And, there are many issues and matters that are under development as we speak, including in Paris, concerning the private sector involvement that was sought by Germany, in particular, but other members of the euro zone.
Let me not comment, actually, on your questions. It is clearly a matter that is high on our agenda, and one that we will continue to work on a troika basis, as was the case up until now and clearly in mind the ultimate purpose that we all pursue, which is to restore the competitiveness of the country.
One broader question about Europe, if I could, particularly now that you have switched perspectives. Do you think the ECB has been overstating the risks of an orderly default or restructuring of sovereign debt throughout the continent? They clearly feel like this would set the dominoes rolling. They also have a lot of their own assets in play and at risk here. So, I’m wondering if you think that because of that they have overstated the risks. Secondly, briefly, I can’t resist, do you think the staff here are all clones of each other?
Dealing with your second question of course not. I attended the town hall meeting; you should have seen the room. Your room here is full, but the room yesterday was just amazing. And what was even more amazing was the diversity that was clearly obvious in the room.
What I suggest is that diversity is multifaceted. It’s not just about gender, color, religion, sexual preferences, but also about culture, also about academic background. I think that we need to draw on the resources and the intellect developed in many corners of the world, because that will make us better and richer.
Now, on your first one, I have very, very clear recollections of the first days of September, 2008. And the last days of September, 2008 when some people at the beginning of the month thought, “It’s not a big deal, it will teach those guys a lesson.” At the end of September it was not quite on the same page. I think that it doesn’t hurt to be maybe overly concerned, but to try to anticipate consequences of any of the measures being considered. I think we have been burned once. Better be shy this time.
You just emphasized diversity several times. My question is, in terms of the Fund’s management reform, could you elaborate on the timeline or the framework of the management reform? How soon should we expect a real change?
I’ll be very clear on that. It is a twofold response. Firstly about management style, it is not criticism of my predecessors, but my style is about opening up, reaching out, engaging people and working as a team. I can’t do it alone. They can’t do it alone. We have to pull the institution together and engage the staff. Make sure people are not only satisfied with the work, but proud with the results, and happy with their work. So in terms of — and I’m not suggesting that they were not happy or not proud. But my way to try to organize that is by working as a team. So there will be a delegation of work, there will be regular meetings of the team, so that we can all be on the same page. And by “team,” I mean the management team, with the Deputy Managing Directors, but also the heads of department.
Now, in terms of physical changes, as you know, the addition of a fourth Deputy Managing Director was being considered by my predecessor. Not a bad idea and I’m going to consult in the next few days on this matter.
Question: Let me ask you a couple issues I’m sure you have not expected to come up. As a lawyer, until recently a French finance minister, how do you counter accusations that you are, one, not qualified to take decisions on economics; and two, might have the interest of French banks and French taxpayers at heart on issues like Greece rather than those of the IMF?
You always ask such nice questions, always a pleasure. You know what? I’m not going to brag about my qualifications, or lack of qualifications. I think that the truth of the pudding is in the eating, as you say, and we’ll see how it goes. But I come to the job with an open mind, with my ability to manage and draw resources and willingness to contribute from all. Not going to second-guess. I’m going to ask questions. I’m going to evaluate, and I’m going to rely on the advice of people who know well their area. And, you know, without being too poetic about it, not all conductors know how to play the piano, the harp, the violin, or the cello. So I’ll try to be a good conductor.
As to the bias that I would have to favor one or the other, certainly don’t expect me on that particular front. I will not be biased.
Mr. Lipsky: It is too bad all of you couldn’t have joined us at the town hall yesterday, to have seen the enthusiasm of the staff in welcoming our new Managing Director. She brings many firsts. As I said, many people say she is the first woman Managing Director, but she is to my mind a woman of firsts, with great experience leading a large international organization, experience in both the private and public sector. The staff is very welcoming and very enthusiastic about the leadership that Christine Lagarde is going to bring the IMF.
From your very long experience as a lawyer, given your experience as a lawyer in the U.S. for quite some time, what lessons do you think ought to be drawn from the way the U.S. legal system handled the Strauss-Kahn case? The way the U.S. legal system handled Mr. Strauss-Kahn’s arrest and subsequent proceedings, and what lessons ought the media to learn from that? In a related question, you have talked several times about how you would follow Mr. Strauss-Kahn on certain reforms he had made. How would you consider that you would differ from Mr. Strauss-Kahn?
The Managing Director: If you will allow me — and you will appreciate why — not to comment on the comparative study of the judicial versus the continental law system as we call it. Different systems, different backgrounds, different ways of reaching what is critical in my view, and I speak as a former lawyer, to that end, the truth. That is what eventually all legal systems aim at.
Now, what lessons to be drawn as far as the media is concerned? I think the presumption of innocence is something that is highly valued the world over, sometimes protected, sometimes respected, and I think it would be the honor of the media to actually respect that as well.
More broadly, actually, this huge appetite that media has in general for the new announcement, the new bit that you will be able to capture and make headlines with, sometimes blurs the overall judgment and the sagacity often required to analyze, for instance, an economic or a fiscal program. There are obvious examples that we can use. When a program is designed, for instance, when the agreement is reached, it is obvious that the results cannot be acknowledged and computed the following day. So, the passing of time that I was referring to earlier on, which makes us look a bit old, which whitens our hair, is often something of use to better analyze the situation.
How might you differ on the policy basis at the IMF from Mr. Strauss-Kahn?
The Managing Director: One difference that comes to my mind right from the start is the management style, because I’m a different person. And I’m probably more inclusive, more team minded. In terms of substantive issues, allow me to take stock and be properly briefed and appreciate the depth and substance of some of the matters that are on our plate in the coming weeks. I’m sure I will come back to you.
I want to follow-up on the Strauss-Kahn case. Would there be any reforms in the human resources policies here? Do you plan any changes in them in light of the controversy over Mr. Strauss-Kahn? And, will it make a difference that you are a woman? Finally, is there too much testosterone in the building?
The Managing Director: I thought I was making it clear that diversity and the value of diversity was at the top of my list of priorities as far as the Fund was concerned. Together with diversity comes respect for everybody, and it has been the case in the past that people have been respected. I will make sure that they continue to be respected, no matter what their differences are. That goes to both the substance of the analysis, but also the individuals as they stand.
Apart from that, I will very shortly be taking the training program on ethics, and I think it is a very good thing. I had instituted such a thing in my law firm prior to my government life, and I look forward to it.
It is not the first time we see a French Managing Director and an American Deputy Managing Director. There has been a lot of talk about the role of emerging economies. Would you consider changing the status quo right now, would you consider a Deputy Managing Director from an emerging economy? I put that question to both of you, Mr. Lipsky, and Madame Lagarde, as well, please.
The Managing Director: I think I addressed the second part of your question earlier on, saying that the matter was under consideration by my predecessor and I will consult, and consult very rapidly on this matter. Otherwise, I don’t plan to change my nationality.
