The Captain's Not For Moving: The Full Lagarde Interview

Here, for those who like these things, are the full quotes from our Christine Lagarde interview earlier today.

The captain stays with the ship

Given it’s the centenary of the sinking of the Titanic, the choice of metaphor was probably a little unfortunate – but the message is clear nonetheless. Christine Lagarde is determined to do everything she can to ensure the International Monetary Fund doesn’t lose money on its euro bailouts.

When I asked her whether she would consider resigning if the Fund lost money, the IMF managing director said:

Well that’s an interesting proposition! I tell you something- we never leave the table of negotiations with our members and I would be the last one to leave the table. You know, the captain of the ship has to stay on board until the last moment. And I’m not suggesting our boat is in bad shape. It’s in pretty good shape actually, and I’m determined to do the job.

A fuller (but smaller) handbag

In Davos in January, Mme Lagarde brandished her handbag on stage and said she was on a mission to fill it – in other words to persuade IMF members to provide a bit more cash in case of future crises. I asked her how full that bag was now.

We are Half-way through, a little more than that actually. We’ve actually formally started a few days ago. And at this point in time, thanks to obviously, the eurozone, Japan, the Nordic countries, Switzerland, we are at 320 billion dollars, which is not bad, not bad at all. And we have more in the pipeline. They will be announced in the coming days and I hope that by the end of the spring meetng that we have reached critical mass.

Q: But isn’t that $400bn target a diminished ambition from the previous target [of $600bn]?

We have adjusted our target in view of the actual risks. And if you remember we did a risk assessment back in December. And in Dec we had lots of big clouds on the horizon. We had financing needs for two years. We had few measures taken by Italy, Spain, Greece.

So we reassessed at the end of March to make sure that the risk assessment we had done…was still accurate. Are we were reassessed downwards. Not so much because countries have gone under the radar screen or because so much measures, so many measures have been taken, but because we’re essentially three months into the year. And that some of the countries have not only secured their financing for the three months but have anticipated and have covered their financing needs for much more than three months.

So we reassessed downwards and therefore the bag that I’m carrying around is a little bit smaller but still, you know, significant.

More money please, George

Here’s how Mme Lagarde responded when I asked her why Britain should be giving more resources to the IMF:

Because it’s in their interest. You know, why do you think Japan is committing 60 billion dollars? Japan is a multilateral country at heart. The UK is as well. The UK is a founding father of the IMF. John Maynard Keynes was one of the Fund’s two patrons.

And the UK is there for international grave situations. It’s always been there. It’s always been a very loyal partner when it’s tough.

But it’s in their interest. Because if the key partners of a country like the UK are in very bad shape they are bad clients. They can’t pay their bills. They cant trade properly. And its not in the interest of the UK to have a weak euro.

Contemplating a break-up

I then asked whether those euro risks included a potential euro break up or a disorderly default, as spelled out by the IMF’s own World Economic Outlook earlier in the week.

We have to consider all potential risk scenario because that’s the best way to be of service to our membership. To indicate what are the risks on the horizon. What would be the escalation of damage. Of collateral damages – because if something of that nature was to happen it wouldn’t be without consequences on the fringes and beyond. Another good reason to try to help them keep it together.

Q: Is it fair to say that without the IMF’s help, the euro would have collapsed?

[Smiling] I would like to think so – but no. The IMF is available to the entire membership and to specific members when they face difficulties. This was clearly the case with a country like Ireland, like Portugal, like Greece, and we have to continue supporting the members in trouble. Under our system of rules, controls, we only lend if there is implementation of the economic program because our endgame is to restore stability, is to help countries that essentially have balance of payment problems, or financing problems which are very acute.

Q: So your endgame is to ensure the survival of the euro?

No. My endgame is to bring more stability across the global economy and we have to help the Arab spring countries. In due course we help the Latin American countries. The Asian countries when they faced the Asian crisis. Now it’s the euro zone that has had specific difficulties, which is why we are looking at them and helping them.

Give directly to Spanish banks

I asked Mme Lagarde about the notion that the euro bail-out funds should be able to give directly to Spanish banks rather than having to channel the money through national governments. She answered as follows:

I was very pleased to hear that the Spanish government is taking this issue very seriously and is taking appropriate measures to deal with the recapitalization of banks. That will happen across the world essentially. Because the Basel III standards that require more capital will apply gradually in all corners of the world. And it is specifically acute in some countries. Spain is dealing with its issues. We wish it could happen more directly between the European pool of money rather than have to be channeled through the sovereign.

It can happen effectively through indirect means, via the country. It happened in Greece for instance. It happened in Ireland but the relationship was between the FSF at the time and Ireland. The end result was recapitalization of banks.

A future French president?

I finished by asking Mme Lagarde about the rumours that one day she could run for the French presidency. She was characteristically tight-lipped:

I’m very pleased with the job that I’m doing and I’m not so concerned about always being the first [female IMF MD, female French president]. I’m very concerned about somebody being a second after me, and then a third, then a fourth. I think it’s very good that women have a seat at the table.

Q: Do you miss French politics?

I miss France now and again. I miss my French friends.