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French Finance Minister Reflects on Economic Crisis

Despite the deepening global financial crisis, France experienced a slight uptick in economic growth during the third quarter. French Finance Minister Christine Lagarde describes her country's situation in an interview with Margaret Warner.

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  • JUDY WOODRUFF:

    Next, the crisis spreads to Europe. Margaret Warner interviewed the French finance minister, Christine Lagarde, in Paris this morning.

  • MARGARET WARNER:

    So, Madam Minister, thank you for joining us.

  • CHRISTINE LAGARDE, French Finance Minister:

    My pleasure.

  • MARGARET WARNER:

    So, to begin, how bleak do you think the world financial picture is right now? Do you think we are on the brink, really, of worldwide deep recession?

  • CHRISTINE LAGARDE:

    Well, I think we are currently in a very serious situation. Will I call it a recession? I suspect, yes, on a global basis, it's certainly going in that direction.

    France, interestingly, is presenting an interesting face. It has amongst — not an ocean, but at least a large group of countries suffering negative growth. We have positive growth. In the third quarter was a bit of a surprise because we came out with .1 percent.

    But it was a plus, as opposed to Germany, which was minus, U.K., which was minus, Italy, minus, Spain, minus.

  • MARGARET WARNER:

    And the U.S. minus.

  • CHRISTINE LAGARDE:

    And the U.S. minus, as well, yes.

  • MARGARET WARNER:

    Now, a couple of months ago — and I'm not trying to hang you up on this comment — but you said you thought the risk of systemic failure was passed. Do you still have confidence that the world isn't running that risk?

  • CHRISTINE LAGARDE:

    I remember having said that after the big major rescue plan of Freddie and Fannie, as we call them over here. What I believe precipitated a much major disruption was the failure of Lehman Brothers, which clearly disrupted the whole system in a much more intrusive and much deeper way than probably was expected or feared by anybody.

    And we came to realize that afterwards. And I suspect nobody thought it would be as bad as it turned out to be, because the trust that most operators put in the system was then broken, and everybody suspected that there might be others.

    And when the financial actors don't trust each other and stop lending to each other, then it's the whole economy that is put to a halt. And that's what we're seeing at the moment.

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