Press Release No. 11/253

Press Release: Statement by Christine Lagarde to the IMF Executive Board

June 23, 2011

Ms. Christine Lagarde, a candidate for the position of the Managing Director of the International Monetary Fund (IMF), made the following statement to the IMF Executive Board on June 23, 2011:

Members of the Executive Board,

Let me first thank you for the very productive bilateral meetings I had with each of you yesterday and this morning. I truly value the occasion to exchange views and to benefit from your insight. I am equally honoured to deliver to the full Executive board some preliminary remarks, before answering any question you might have.

As a candidate, I have listened carefully over the last few weeks to the messages conveyed to me by a large part of the membership and I would like to lay out some thoughts of mine and address some of the issues:

1. Management: the three duties of MD

If elected, I am committed to fulfil, with your support and active engagement, the three key duties of a MD: to chair the Board; to manage the staff; and to represent the institution.

Duty 1: Chairing the Board

I strongly believe in the value of a permanent resident Board. Without a Board representing the membership, there can be no global multilateral organization. I am convinced that the Board's work confers legitimacy to the Fund’s action.

A strong relationship between the MD and the Board can only be built on trust and respect between us. To lay the proper foundations of such a relationship, if elected, I would call for a Board retreat before the recess.

Duty 2: Managing the staff

The staff is the Fund's key asset. Its independence must be protected now more than ever.

I am well aware that recent events have left open wounds. I know that John's departure, coming as it does at the very worst of times, will leave a big hole. The incoming MD must take pains to show the outside world that this great institution is not only leading in terms of expertise, but also in terms of integrity and work ethics. We must consolidate and, if needed, restore staff pride in working at the IMF, to get us through the healing process.

Last, there is a need for an integrated, coherent, senior management team, with a MD dedicating time and energy to pulling the institution together: only strong leadership will help us overcome silo-mentality, achieve diversity, and gain in cohesion and coherence.

We collectively must focus on serving both our membership and the higher goal of the Fund, and be less inward-looking.

Duty 3: Representing the institution and bringing a vision

The MD has to lead by example, consistent with the values of integrity, independence, and discretion. The MD shall also be the loyal and strong voice of the whole membership when representing the Fund, especially in delivering messages, speaking the truth to members, be them small or large.

2. Direction for the Fund

As laid out in my letter of candidacy, I firmly believe that the legitimacy and effectiveness of the Fund cannot be taken for granted; they must be continuously proved, and improved, whenever possible or necessary.

Under Dominique Strauss-Kahn's leadership, the Fund has definitely changed for the better, successfully repositioning itself at the centre of the global economic and financial system. It learnt a great deal from the recent financial crisis, including openness to new ideas, while remaining loyal to its core values and principles.

The Fund needs however to continue its shift towards responsive, even-handed and balanced action in support of global economic and financial stability, the better to serve the whole membership.

The Fund has a lot on its plate with an uneven world recovery, the reopening of global imbalances, potentially destabilizing capital flows, high level of unemployment, rising inflation, and difficult country cases.

But let me focus today on key principles that should, in my view, lead the Fund over the next five years:

Relevance. The Fund must keep its recently-regained pivotal role with respect to global economic and financial cooperation. The international community needs the Fund and the Fund must have the necessary mandate from its membership to discharge its duties. Because of that I would be open to work with all of you on changes to the legal framework of surveillance such as the 2007 surveillance decision or even explore changes to the Articles of Agreement however difficult they may seem.

Responsiveness: the Fund must constantly enhance its capacity to respond to members' needs based on circumstances, with special dedication to the most vulnerable part of its membership – I am thinking of the low-income countries, especially those in Africa. To succeed, coordination with other partners, including the World Bank, will be decisive.

Tougher, more effective, and more consistent surveillance for better crisis prevention and tailor-made policy advice. Beyond its primary mandate of ensuring the stability of exchange rates, the Fund needs to improve the integration of financial sector expertise into its surveillance, working in cooperation with the Financial Stability Board and other relevant bodies. The Fund must also strengthen multilateral surveillance by addressing global interdependencies: I believe that spill-over reports should become a permanent surveillance tool, an issue we may look again at after the Board meetings scheduled for July. Last, IMF surveillance should look beyond these core elements, factoring in structural and public finance issues, as well as social and employment policies. For the sake of consistency and of pulling together in a more effective and digestible way all the excellent but scattered, and frankly somewhat diluted, global surveillance work, I pushed at the last IMFC for it to discuss a consolidated multilateral surveillance report.

Sufficient resources and adequate tools. This will require first delivering on commitments made by member countries, which will need sustained attention. It will also require better leveraging Fund resources, notably through enhanced cooperation between the Fund and regional financial arrangements. Last, we need to make sure the Fund has the capacity to address systemic shocks.

Increased legitimacy. Legitimacy is a precondition to the acceptance of any reform. One obvious prerequisite is to implement promptly the historic governance reform that was agreed last year. France has shown leadership in this respect. More broadly, if elected, I would be committed to continuously adapt the representation of the Fund, in particular quotas, to changing economic realities. Some milestones are coming up in the near future, and they have to be met.

Diversity and team work. The dedication and expertise of staff have to be nurtured and protected, whilst ensuring equal opportunities and diversity in all its facets, gender-wise, academic and geographic. In-breeding leads to group-thinking and “silo mentality” leads to underperformance, as the report from the IEO (Independent Evaluation Office) pointed out. Diversity will strengthen legitimacy, but will also reinforce effectiveness. This is an area where progress will be achieved, should I be elected.

Let me address heads-on three issues I have identified as matters of concern or interest by some of you.

3. Regarding the selection process

Number 1: I truly believe in an open, transparent and merit-based selection process, allowing for a large consensus to form around the incoming Managing Director. The Fund belongs to no one but its 187 member states. I would like to add that as a Governor to the IMF, I am on record for having supported a selection process regardless of nationality. As a consequence, being French and being European should be neither an advantage nor a handicap.

4. Representing Europe

Number 2: I am not here to represent the interest of any given region of the world, but rather the entire membership, in full accordance with the Fund’s mission statement as laid out in the Articles of Agreement. The Managing Director has an exclusive duty of loyalty to the Fund.

5. Conflict of interest

Number 3: Precautionary or disbursing Fund programs are in place in all regions of the world. Arguing that there is a conflict of interest in being a national from a region of the world in which some member states benefit from IMF support and assistance, not only significantly narrows the scope for eligibility for candidacy, but also seems impossible to “operationalize”.

How would the Fund ensure that during the MD’s mandate, not one single country of the region from which the MD comes from would request financing? One thing is certain: it would eliminate both candidates in the current selection process, even though France has no arrangement with the IMF.

This being said, I take pride in having played a key role in the negotiations around the economic governance package in the euro-zone, as well as in the implementation of the various support programs in Greece, Ireland and Portugal. This was also an opportunity to work closely with the IMF and build a strong partnership with the EU, which I think could be replicated in other regions.

Nevertheless, let me be very clear: if elected, I will have but one thing in mind when it comes to providing support to a euro-area member: ensuring full consistency with the Fund’s mission and providing for good stewardship of the Fund’s resources. I will not shrink from the necessary candor and toughness in my discussions with the European leaders, on the contrary. There is no room for benevolence when tough choices must be made, and there is no option that does not start with difficult but necessary adjustments by the Greek authorities to restore the sustainability of public finances and to rebuild the country's competitiveness.

6. I stand here as…

Having clarified this situation let me state the following:

I stand here as a woman, hoping to add to the diversity and balance of this institution.

I stand here as former head of an international law firm with a dedication to integrity, to the highest moral standards and a belief in participative management.

I stand here as a Finance minister who has been tested in times of crisis.

I stand here as a former Chair of the European Union Ecofin Council and of the G20 Finance Meetings, with a widely-recognized track record and acknowledged leadership abilities.

I would like to put these skills and experience at work to serve the International Monetary Fund.

* * *

To conclude, should you entrust me with the challenging task of MD, I would strive, over the next five years, to build a Fund that would be adapted to a changing world; responsive, ready and able to meet all challenges, both foreseeable and unforeseeable; cooperative, listening and coordinating effectively with all stakeholders, and continuously striving to build consensus; legitimate and even-handed, to reflect a changing world.

Ladies and Gentlemen, Members of the Executive Board, thank you for your attention.