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Next: a newsmaker interview with a woman who is at the center of many important global financial developments at the moment, Christine Lagarde. She is the head of the International Monetary Fund.
I spoke with her today at IMF headquarters just before a series of meetings gets under way this weekend about the economy and global finances.
Christine Lagarde, managing director of the International Monetary Fund, thank you very much for talking with us.
CHRISTINE LAGARDE, Managing Director, International Monetary Fund:
Great pleasure to see you.
So, you, as head of the IMF, moving urgently now to provided aid to Ukraine.
This is at a time when the world has watched Russia come in and take over Crimea. Help us understand why this is so important for the people of Ukraine. What is it that they could not do without this help from the IMF?
The economy of Ukraine was going in the wall and was heading for disaster.
It's an economy that needed reforms, that needed profound transformation of its fiscal policy, of its monetary policy, and of its policies on energy, to mention only the key ones. Without the support that they were getting from this lifeline that Russia had extended a few months ago, they were heading nowhere.
So they have to do those reforms, and they don't have access to the financial market at the moment. So they need the support of the international community and the support of the IMF to design the reforms that they need to put in place, and to have the financing available to sustain them until they can return to the financial markets in order to finance the economy.
But the money comes at the same time the IMF and others are asking them to make some reforms, to make changes, sometimes difficult changes, sometimes to address corruption…
… and other problems they have in the way they are structured.
Do you worry that, if this is too strict, it could make Russia seem like a more appealing alternative, because the Ukrainian people are being asked to pull in their belts, to make some sacrifices in order to qualify for this help?
You are right about qualification, meaning that IMF money doesn't come free.
IMF — the IMF lends financing to countries, provided that countries do for themselves what they need to do to restore the economy to be able to finance themselves without our support. So, we lend money, and the country takes a road to recovery, makes the hard choices, decides for itself what its economic future will be.
And it includes what you said, dealing with corruption, restoring the governance, dealing with the right price of energy, restoring the fiscal situation, and making structural reforms that will help Ukraine get back on a solid track.
Here in the U.S., the Congress has also just last night voted to provide aid, loan guarantees. But the Congress didn't go along with some reforms here for the IMF. Republicans, in particular, say they worry that giving a greater voice to countries like China, Brazil, even Russia, means the U.S. has a smaller voice and less influence at the IMF.
What argument do you make to Republicans in Congress that this is something that should be done?
It is something that should be done because it was committed, because it will deliver a more stable, more solid institution.
And our job is to help stability around the world, financial stability and international cooperation. OK, even if you ignore international cooperation, because you don't believe in that, financial stability around the world is key for all economies.
If there's not a solid IMF to lend in Ukraine, in Mali, in Pakistan, to put in place the economic program, to support the authorities, and to lend money in a sustainable way, then that's a major tool that the American leadership cannot use in any shape or form. The U.S. was one of the founding partners of the IMF. And it's the leading shareholder of the institution.
No matter what is said, the United States will keep its veto right over decisions that are made in this institution. So, to make a bit more space for China or for the emerging market economies is only representative of where the world is going. And we have to be the institution of the future to serve international cooperation, with the constant, solid leadership of the United States of America. Not exercising that leadership is a mistake.
I have one question I want to ask you about Russia, something you addressed today. And that is, as you know, there have been sanctions imposed by the European community, by the Americans. Are those making any difference at all?
We look at economic indicators.
When you see the amount of capital outflows from Russia to the rest of the world in the last couple of months, to look at the decision to change monetary policy on the part of the Central Bank, there has clearly been consequences from the talk of sanctions and from the sanctions themselves.
But, you know, to have this massive outflow has clearly been an indication that money is going out of that country.
But you are saying — excuse me — even the talk of it, you know, had some effect?
… tapering — the talk of tapering has produced effects. The talk of sanctions has also produced effects. It's all about anticipation.
Tapering on the part of the Federal Reserve monetary — monetary policy.
Today, you made a speech just a short time ago about the global economy. Among other things, you said it's improving, but the recovery is too weak. You said we could be facing years of slow and subpar growth.
What does that mean for ordinary people?
It means that, instead of having an economy that is roaring, that is creating jobs, that is delivering innovation, value, you have an economy that is sluggish, that is slow-going, that is not creating the number of jobs needed for those people who are coming to the job market for the first time, or who have been looking for a job for a long time.
And that's what improved growth would deliver.
And what should be done? You talked about what needs to be done about it.
A combination of things.
One is structural reforms, and across the board.
And what does that mean?
It means eliminating barriers, allowing and enabling entrepreneurs to set up their business without barriers, with bureaucracy, without hurdles on the way.
It means reforming the job market, so that people who can access the job market, who want to get a job and work can actually do that. And that applies to men and women. There are lots of women, not in this country, but across the planet, that would like to access the job market that could create and deliver value that cannot do it. To liberate that access would certainly improve the situation.
Those are two examples of areas where removing the barriers, removing the hurdles will actually unleash the potential. Other than that, you have monetary policy, you have fiscal policies that also need to be adjusted to facilitate growth.
You also have spoken, and I believe you addressed it again today, the importance of getting women more involved in the economy.
And you have talked in — you have talked in the past about how important it is to have women playing senior roles in the economy. Why does that make a difference? And for men who are listening and saying, well, what is the difference, why would women be — make a company or a business more successful than a man, what would you say?
I think there are multiple studies now to demonstrate that diversity, a better balance between genders, but also between different fields as well, is actually conducive to better growth, better bottom line, better results.
So, whether you look at stocks, whether you look at performance, whether you look at output, it's true pretty much across the board. And it makes economic sense to actually facilitate the access of women. If you take a country like Korea or Japan, where there's an aging population, and where immigration is not taken for granted, opening the gates for women to access the job market is a good way to respond to that situation.
Christine Lagarde, the managing director of IMF, thank you very much.
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