SPIEGEL Interview with IMF Chief Christine Lagarde 'There Has Been a Clear Crisis of Confidence'

IMF Managing Director Christine Lagarde: "There has been a clear crisis of confidence that has seriously aggravated the situation."
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IMF Managing Director Christine Lagarde: "There has been a clear crisis of confidence that has seriously aggravated the situation."

Part 2: 'European Leaders Have Made Very Strong Commitments'


SPIEGEL: You suggest fighting the effects of a debt crisis with more debt?

Lagarde: That's not how I see it. In a world that is so economically interwoven, where the actions of industrial countries have direct influence on emerging economies, one can't be stubborn when the situation changes. We didn't change our minds about the dangers of too much debt, but over the current state of the world economy.

SPIEGEL: The effects of too much debt can be seen right now in the euro zone, where the European Central Bank had to buy up billions in government bonds. At the end of September, the European rescue fund, the European Financial Stability Facility (EFSF), will take over this task. Does it have enough money to do so?

Lagarde: The EFSF will now be flexible enough. It has been in a bit of a straitjacket. Now it has the option to buy on the secondary market in certain circumstances, to support the banks and provide guarantees. That is very welcome.

SPIEGEL: Europe's leaders have given EFSF head Klaus Regling a pile of tasks, but not more money. Will the allotted €440 billion be enough?

Lagarde: French President Nicolas Sarkozy and German Chancellor Angela Merkel and other euro leaders have said they will do what it takes. That would include increasing the EFSF if necessary, I suppose.

SPIEGEL: Does that include going as far as supporting Italy? Isn't the country far too big to be bailed out by other EU countries?

Lagarde: The European leaders have made very strong commitments concerning the euro currency and the euro zone. I think markets should appreciate the strength of those statements and the strength of their political commitment. There has also been a significant improvement in terms of fiscal consolidation and structural reforms in Italy.

SPIEGEL: Critics say that Greece has had enough help and should be kicked out of the euro zone. Do you think that's a good idea?

Lagarde: Number one, it's not for me to decide. Number two, I think that all the partners, whether in the European Commission, ECB or IMF or members of the euro zone, are determined to make this work and ensure that the Greek economy regains competitiveness and is properly restructured.

SPIEGEL: There are a growing number of stumbling blocks emerging in the euro zone. Finland has demanded guarantees from Greece before the bailout money flows, inspiring other countries to consider following suit. Doesn't that put the entire rescue mechanism in doubt?

Lagarde: My understanding is that the euro members are working on this and are working on the pattern that would actually respond to all euro-area members' expectations. In other words, not a tailor-made program that would fit Finland and nobody else. I am certain the euro-zone members are aware of their responsibilities and will find a solution.

SPIEGEL: In France, it is possible that there could be legal proceedings against you. You are accused of having abused your position as French finance minister by making sure that businessman Bernard Tapie received compensation from the French state in connection to a deal involving Adidas that went wrong. Will you resign from your job if you have to defend your actions in court?

Lagarde: This issue was actually contemplated at the time of my candidacy for the position. The IMF board concluded that that case was perfectly compatible with me continuing my job and carrying out all my duties.

SPIEGEL: If we may ask one more question on this topic: Is it true that you acted on instructions from President Nicolas Sarkozy?

Lagarde: If I had to answer that question, I think I would answer it in court. I think that would be more appropriate than discussing it with SPIEGEL.

SPIEGEL: There is an unwritten rule that the top job at the IMF is always occupied by a European, and in return the Americans get to appoint the head of the World Bank. Given the world's shifting center of gravity, do you believe that you are perhaps the last European who will hold this position?

Lagarde: I hope not -- that would exclude many talented people from the competition -- but, you know, it's not for me to say. I'm not sitting here as a European, and I've tried to disengage from thinking as a European or thinking as a French national. The moment you walk into this organization, you become a servant of a global institution.

SPIEGEL: Ms. Lagarde, we thank you for this interview.

Interview conducted by Marc Hujer and Christian Reiermann.

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