Transcript of a Press Conference by International Monetary Fund Managing Director Christine Lagarde with First Deputy Managing Director John Lipsky and External Relations Director Caroline Atkinson

Washington, D.C.
July 6, 2011

Ms. Atkinson: Good morning, everybody. Welcome to the IMF, and to the first press conference of our new Managing Director, Christine Lagarde. We also have the First Deputy Managing Director, John Lipsky, and I wanted to let you know that we have simultaneous translation, so English is on channel 1, French is on channel 2, Spanish is on channel 3, and Arabic is on channel 4.

You all have head phones. Also, just wanted to let you know that we have some mics that it would be helpful if you would move up to ask questions. We have three mics in the room. Because there is so much wireless technology now that it works better if you go to the microphones, the equivalent of land line phones.

Madame Lagarde is going to begin with opening remarks and then we will take your questions.

The Managing Director: Thank you very much. Bon jour! Good morning to all. It is very, very nice to be back in Washington.

My personal role has gone from Washington to Paris, from Paris to Chicago, from Chicago to Paris, and back to Washington. So, it is lovely being back.

I thank you all for turning up and being here for this first press conference. What I will do, and I will ask for your indulgence, I will concentrate on a little bit of the status of the world as I see it at the moment and as I take this job with great pride, great humility, as well, and some trepidation, given the excitement of the job, and then I will give in a nutshell where I see the key priorities in terms of the Fund's mission.

Before I do that, I would like to pay tribute to the Fund at large, to the nice lady who is bringing me some coffee, and to the man sitting to my right, John Lipsky. As you know, he is the First Deputy Managing Director. He will be completing his term on the 31st of August and has been throughout his term a fantastic First Deputy Managing Director. I was able to see that from a distance, from where I was, as clearly a shareholder, a client and a member of the firm, representing France on many instances, fora, and other seminars.

I can tell you that John has been a fantastic advocate, spokesperson, person of substance, as well, and a person of charisma and joy in the last few weeks. He has been a critical addition. In opening these remarks, I would like to say so publicly and with great friendship to him.

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.

In terms of issues, as we see them, as you see them, as you describe them, as you underline them, wherever your eyes turn, wherever you are located, whatever your articles will be, there are issues, there are concerns. When we look at the status of the world, we have clearly gone over the financial crisis that hit all economies, and particularly the advanced economies in the fall of 2008. And which continued throughout, at least well into 2009, and in some countries well into 2010. And some might argue that it is continuing, given that the growth potential has not been restored in many countries, given the fact that unemployment is still very high in many corners, and therefore a lot needs to be done by the economic players.

Now, obviously, recovery has taken its course, as well. When we look at our growth forecast for 2011, 2012, we are clearly on a rebound and things are improving, and are getting better, if we compare with the situation as it was in 2009 in the height of the crisis. That recovery is, as people will say, as you will comment on, uneven. If the growth forecast is in the range of 4.5 percent, looking ahead, it is clearly unbalanced in the sense that advanced economies are more in the range of 2.5, whereas emerging markets are more in the range of 6.5, some of them, such as India and China, hitting much higher marks. We are facing a turnaround which is very uneven, with countries leading the charge and not those that were historically leading the charge, and others, advanced economies that are lagging behind in a way, given their status of development.

In the midst of that, we have clearly in each of those two categories different issues to address, and where clearly the Fund can provide service, can provide guidance, can provide advice and recommendations, and if and when necessary, and if asked, obviously support. Those two categories are, on the one hand, the issues of sovereign debt. And that concerns all advanced economies, ranging from Japan to the United States, but clearly with a focus, as you write about it, as we know, with a focus on the euro zone and in particular on countries such as Greece.

On the other hand, when we look at the emerging markets, we have in some corners the risk of overheating, and we obviously have the risk of inflation as well. And sometimes, particularly in the low-income countries, the risk of imported inflation that results from the high prices of commodities. And I include in commodities obviously both oil, energy prices in general, but of course agricultural products as well, which are so critical for low-income countries.

So that gives the Fund a landscape where to really excel in terms of giving advice, recommendations, analysis, ringing the alarm bell now and again, and obviously providing support if and when necessary. We are facing a landscape that is in better shape than two years ago, but clearly with an uneven process of recovery and specific issues of a divided nature, given the division that we are seeing between the advanced economies on the one hand, the emerging markets on the other, and the least developed countries, or low-income countries, however we want to call them, with specific issues and yet a path to recovery that is obviously pronounced.

Let me now turn, I'm sure you will have questions and I'll be very happy to take your questions. I'll be very humble also in saying "I don't know" when I don't know. Because, as you probably decipher, I'm new to the job. I was a member of the Fund for a few years. I was an active shareholder of the Fund. I have been on the receiving end, if you will, whereas I'm now finding myself as Managing Director, clearly on the sending end, the giving end because we are here to serve the membership of the Fund, that is the 187 members, for those of you who were eventually in doubt.

Let me turn to some of the things which I believe the Fund should focus on, and I will address them in two chapters, if you will. One that concerns the external action of the Fund, and one that concerns the inside issues of the Fund. I will take the latter second because I regard them as important, but not as the key priorities. Certainly, my wish is for us, the Fund, that is the Executive Board, the management, and the staff, which as I have said yesterday in the town hall meeting, is the key asset of this institution, we need to focus on the outside. We need to focus on what we can provide. We need to be available for our membership and not constantly look at our belly button and wonder how we can best do this or that. We will, but those are not the immediate priorities in my view.

Those three external chapters, if I may say, all begin with a C, which helps me to remember exactly the order in which I want to take them.

The first one has to do with connectiveness. We have seen during the crisis that all countries, all sectors, industries, services, finance were highly connected with each other, and amongst themselves. And, we need to address that interconnectiveness, all those interconnections, however you want to call them, with a view to refining, enhancing and improving the type of services we provide to our members.

For those of you who are familiar with the Fund, we have the bilateral work, and to take a very traditional example, it is the Article IV review, the work done, the substantive work done by the Fund, to really analyze the quality of an economy and make recommendations. But, we do not necessarily take into account this interconnectedness that is so obvious to us and that has been clearly epitomized by the crisis. First of all, let's focus on those connections and those connecting points between economies, within economies, and make sure that our services and our advice are actually properly including that particular aspect.

My second C is credibility. The first one was connections, connecting points, the second is credibility. For the Fund to be credible its analysis, its work needs to be candid, needs to be credible, needs to be evenhanded. There is no one category of country that deserves a special treatment, and another one that will receive harsh treatment. Evenhandedness, level playing fields are words that you will hear me say over and over.

The third C is the comprehensiveness. In other words, it needs to be connected, credible, and comprehensive. And by that I mean, we cannot only analyze the economy by looking at some of the traditional standard criteria. We cannot be only driven by the hope to reduce fiscal deficits and organize fiscal consolidation in a big way, reduce debt and make it sustainable. Those are key criteria, but they're not the only ones. And the path that has been clearly opened by my predecessor, Dominique Strauss-Kahn, to include such matters as employment, social affairs, peripheral components of the traditional economic look at the situation of a country, needs to be taken on board as well.

I'm not suggesting that the Fund should be turned into a specialized boutique on employment and best way to reduce unemployment. We need to rely on other institutions that exist. And clearly the work, for instance, that has been undertaken together with the ILO, needs to be pursued. The same goes with work together with the WTO.

So, the comprehensiveness of our approach must be enhanced, because ultimately we should never lose sight of what we are about. The International Monetary Fund is here to serve and to provide services to its 187 members, with a view to what? To help restore stability where there is instability, and there is plenty of that around; to help make sure the economies of the world work better to provide a better welfare for people. And to that, clearly, employment is a key issue. Whether you look at advanced economies, or whether you look at emerging markets, or low-income countries, the issue of employment is a critical one, and one that actually determines a stable social chemistry for society. So we should not lose sight of the overall main goal of the Fund.

Now, turning, because I told you that there were three chapters that were my C priorities, connectiveness, credibility, and comprehensiveness, the two chapters concerning the internal affairs of the Fund, that reflect on the external as well. It's a bit of the Gestalt theory where the form and substance are actually very closely interlinked. The same is true with the Fund. What we do externally reflects on how we're built internally, and vice versa.

To that end, we must obviously continue to improve the legitimacy of the Fund, and that touches on the governance. It touches on the appropriate representation and representativeness of all members, which does not exclusively translate into quotas or into seats at the Board. Not to say that we must not. Quite the contrary. We must complete the reform that was approved in 2010, and I will see that we do that. Before I left France, I made sure our quota increase was duly wrapped up in the parliamentary process and approved by my parliament. So we must complete the 2010 reform, and governance and quotas must be adjusted to reflect the new architecture of the world. But, that should also reflect in our employment policies, in our training policies, in the way in which we build teams, in the way in which we organize recruitment so that people are not clones of each other. And, that the second aspect, which to me is very important in addition to legitimacy, diversity is actually properly taken on board.

It is not just gender diversity for those of who would worry about it, and feel excluded. Diversity is about including, not excluding. It is about reaching out. It is about engaging, about breaking down the barriers, removing the obstacles, so that all participants can actually be at the table. And that touches on gender. It touches on geographical origin. It touches on culture. It touches on academic background. So as I said, so that we can take advantage of the differences that we all bring to the overall table of the International Monetary Fund.

With that, unless, John, if you want to add something?

Ms. Atkinson: Thank you very much. As I said, it would be great if you could move to one of the microphones for the ones -- yes, please. And, you can go first. Thank you. Identify yourself and your news organization. And, please, one question each.

Question: 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?

The Managing Director: 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.

Question 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?

The Managing Director: 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.

Question: 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?

The Managing Director: 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.

Question: 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?

The Managing Director: 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.

Question: I have a question in French, if you allow me.

Your first IMF Board meeting will apparently be on Greece. What is your strategy to address this 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.

Question: 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.

Question: 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?

The Managing Director: 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.

Question: 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?

Do you think the staff here are all clones of each other?

The Managing Director: Dealing with your second question, of course not. 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.

Ms. Atkinson: Just a couple more questions.

Question: 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?

The Managing Director: I'll be very clear on that. It is a twofold response. No. 1, 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?

The Managing Director: 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.

Question; 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 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.

Question: 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.

Question: 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.

Question; 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 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.

Ms. Atkinson: Thank you all very much. Thank you all very much indeed.

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