{
  "title": "Transcript of an Interview with IMF Managing Director Christine Lagarde with the Leading European Newspapers Association",
  "publication": "IMF News, April 12, 2017",
  "sourceUrl": "https://www.imf.org/en/news/articles/2017/04/17/tr041217-transcript-of-an-interview-with-imf-lagarde-with-lena",
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  "summary": "Growth is picking up, including in Europe, but political uncertainties (including what Lagarde calls the “protectionist sword”) are a major concern.",
  "publishDate": "2017-04-12",
  "sections": [
    {
      "heading": "Political uncertainty, elections, and protectionism",
      "content": "- Growth is picking up, including in Europe, but political uncertainties (including what Lagarde calls the “protectionist sword”) are a major concern.\n- France:\n  - The uncertain outcome of the French elections matters because of France’s role and size in the euro area and because some ideas discussed could disrupt the EU architecture.\n  - “The sooner that uncertainty is removed, and I guess it will have to wait until May 7th, the better it will be for the global economy, and of course, for the euro area economy.”\n  - The fate of the euro is “clearly one of the debates” in the French presidential elections and affects confidence and stability in the euro area.\n- United States:\n  - The Trump administration had been in place “for more than two month” at the time of the interview; Lagarde observes a “great discrepancy between the pre-election rhetoric and the actual steps that have been taken.”\n  - Her approach: focus on actual measures, policy determination, and implemented laws rather than speculation.\n  - At the G20 and in discussions with the US Treasury, she sees “the willingness to work together” and is “reasonably optimistic” that cooperation can clarify confusion and misunderstanding.\n- Trade:\n  - Distinguishes between protectionism and the concept of “free, fair and global trade.” The IMF intends to discuss and define what is meant by “fair” at the IMF/WB spring meetings."
    },
    {
      "heading": "US fiscal expectations and global effects",
      "content": "- Expectations from an expected US fiscal stimulus and tax reform have raised market optimism and asset valuations:\n  - “Asset prices are at their highest in the last 8 years or so.”\n- Outcomes remain uncertain: timing, implementation, spillovers to the real economy, and the magnitude of private-sector investment.\n- Potential positive transmission if private investment and R&D financing increase."
    },
    {
      "heading": "Germany: external imbalances and investment",
      "content": "- Excessive external imbalances should be reduced, tailored to each country’s circumstances.\n- Germany:\n  - Lagarde: “Yes” — Germany should do more and invest more in infrastructure for itself and Europe.\n  - Justified surplus: “4% would perhaps be justified, but 8 % is not.”\n  - Positive notes: Germany has begun investing (including refugee funding and infrastructure) and financially commits “0.7 percent of GDP to global development.”\n  - Recommendation: more investment, e.g., in broadband."
    },
    {
      "heading": "Greece: IMF participation, reforms, and debt sustainability",
      "content": "- Two dimensions for any IMF financing: short-term program alignment with ESM and the longer-term fiscal path for debt sustainability analysis.\n- IMF stance and conditions:\n  - Any IMF participation would be based on fiscal path and the IMF’s debt sustainability analysis.\n  - “In the long term, we believe that a 1.5% primary surplus is sensible given all that the economy has gone through, and given the Greeks' capacity to reform.”\n  - If Europeans determine differently, that must be taken into account, but the IMF will not adopt unreasonable forecasts or unjustifiable macro frameworks.\n  - IMF participation is “plausible” if significant reforms are legislated and if debt is restructured to accommodate IMF debt sustainability rules.\n  - “The volume of our possible financial commitment is not going to be necessarily the most important contribution... It is more our discipline, our integrity, and our expertise... that is actually a greater value to Europeans.”\n  - Without debt restructuring that achieves sustainability “in accordance with the IMF’s rules and on the basis of reasonable parameters, we will not participate.”\n  - Lagarde: “There is no question in our mind that a degree of debt restructuring is needed.”\n- Timing: IMF is taking additional time to secure “two legs” for the program—solid reforms and sustainable debt—so staff will return to Greece to negotiate and put agreements on paper."
    },
    {
      "heading": "Spain: recovery, labor market duality, and remaining vulnerabilities",
      "content": "- Spain has shown strong recovery momentum:\n  - “Spain has growth now; a growth momentum that is higher than anywhere else in the EU--except in UK perhaps--and certainly the highest in the euro area.”\n- Remaining challenges and statistics (as cited in the interview):\n  - Unemployment rate at 18%\n  - Young unemployment rate at 40%\n  - Public debt at 100% and still growing\n  - High external debt and risk of poverty and lack of job stability\n- Key issues and recommendations:\n  - Labor market duality (short-term exposed vs. long-term protected contracts) needs to be addressed.\n  - Continued reforms are essential; Spanish success owes much to determination on reforms, addressing banking sector instability and non-performing loans, and cooperation among ESM, the European Commission, and the IMF."
    },
    {
      "heading": "Eurozone resilience and deeper integration",
      "content": "- The euro area is better equipped than in 2008: presence of the European Stability Mechanism (ESM), strengthened supervision, and improved banking regulation.\n- Remaining structural needs for resilience:\n  - A clear, efficient, and respected Stability and Growth Pact (more so than today).\n  - A common joint fiscal policy.\n  - The ability “to raise and manage debt on a euro basis” (Lagarde clarifies this is not a direct endorsement of Eurobonds and leaves details to European leaders).\n  - Progress toward completing the banking union.\n  - Concept raised: one day having a single Finance minister (as advocated by Jean-Claude Trichet).\n- On further integration:\n  - If no “unpleasant surprise” from French and German elections, a move toward more integration would be consistent with the monetary union’s initial proposal, balanced with respect for national cultures and traditions."
    },
    {
      "heading": "IMF policy views and recommendations",
      "content": "- On excessive imbalances, inequality, and financial instability: all three are harmful to stability and sustainable growth; the IMF will call them out without moralizing language.\n- Emphasis on cooperation and demonstrating the benefits of cooperation at international forums.\n- On fiscal coordination in the euro area:\n  - Question posed: why not agree on a global fiscal impulse of 0,5% of GDP in 2017 as recommended by the IMF and the European Commission?\n  - Lagarde’s answer: euro area architecture reform is not finished; fiscal measures are taken at the national level. She expresses hope that the Juncker plan will demonstrate willingness to have a larger common budget beyond limited investment budgets.\n\nTranscript dated April 12, 2017. IMF Communications Department; MEDIA RELATIONS; PRESS OFFICER: Andreas Adriano. Phone: +1 202 623-7100Email: MEDIA@IMF.org\n\n---\n\n\n References\n\n- France and the IMF\n- Germany and the IMF\n- Greece and the IMF\n- Spain and the IMF\n- Transcripts\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2017/04/17/tr041217-transcript-of-an-interview-with-imf-lagarde-with-lena"
    }
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    "Published: April 12, 2017",
    "Growth is picking up, including in Europe, but political uncertainties (including what Lagarde calls the “protectionist sword”) are a major concern.",
    "France:",
    "United States:",
    "Trade:",
    "Expectations from an expected US fiscal stimulus and tax reform have raised market optimism and asset valuations:",
    "Outcomes remain uncertain: timing, implementation, spillovers to the real economy, and the magnitude of private-sector investment.",
    "Potential positive transmission if private investment and R&D financing increase.",
    "Excessive external imbalances should be reduced, tailored to each country’s circumstances.",
    "Germany:",
    "Two dimensions for any IMF financing: short-term program alignment with ESM and the longer-term fiscal path for debt sustainability analysis.",
    "IMF stance and conditions:",
    "Timing: IMF is taking additional time to secure “two legs” for the program—solid reforms and sustainable debt—so staff will return to Greece to negotiate and put agreements on paper.",
    "Spain has shown strong recovery momentum:",
    "Remaining challenges and statistics (as cited in the interview):",
    "Key issues and recommendations:",
    "The euro area is better equipped than in 2008: presence of the European Stability Mechanism (ESM), strengthened supervision, and improved banking regulation.",
    "Remaining structural needs for resilience:",
    "On further integration:",
    "On excessive imbalances, inequality, and financial instability: all three are harmful to stability and sustainable growth; the IMF will call them out without moralizing language.",
    "Emphasis on cooperation and demonstrating the benefits of cooperation at international forums.",
    "On fiscal coordination in the euro area:",
    "[France and the IMF](http://www.imf.org/external/country/FRA/index.htm)",
    "[Germany and the IMF](http://www.imf.org/external/country/DEU/index.htm)",
    "[Greece and the IMF](http://www.imf.org/external/country/GRC/index.htm)",
    "[Spain and the IMF](http://www.imf.org/external/country/ESP/index.htm)",
    "[Transcripts](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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