Christine Lagarde: Interview with NOS Nieuwsuur
Transcript of the interview with Ms Christine Lagarde, President of the European Central Bank,
and NOS Nieuwsuur, conducted by Ms Mariëlle Tweebeeke on 12 December 2019 and
broadcast (in part) on 12 December 2019.
* * *
Christine Lagarde, thank you so much for making time for us today. It's really
appreciated. A special day; you've just had your first press conference as President of
the ECB. Had you ever thought you would be President of a central bank?
No! Never, but I never thought I would be Managing Director of the IMF, and I never thought I
would be Minister of Economy and Finance for France, so my life has been like that.
Have you already learned the lingo of the ECB?
I'm learning! I'm learning a little bit of German, I'm taking lessons and I'm constantly immersed in
central banking jargon and concepts and attitude of mind, but I'm learning fast.
You made clear at the press conference that you have your own style.
Yes.
But can you be yourself in this role? Because every word you say as president of the
ECB might instantly impact financial markets.
Well, first of all, I like words. I tend to be attentive to the words I use, so that suits me fine. And
what I did during my press conference, the first one, I tried to warn the journalists in the room and
the journalists and observers behind their screens that they have to take me for who I am and not
try to second-guess or associate or proceed by an analogy, an analysis or comparative work
because it would probably be misguided. And I think the trade-off for that is that when I have
something to say, I will say it. That's more my style and my nature.
Yes, you want to make that clear. You never led a central bank before. Do you think
that's an advantage or a disadvantage?
Having been Minister of Finance for four years, in the middle of the financial crisis and having
navigated the difficulty of that, having had to put in place a lot of regulations that still apply today to
sanitise and strengthen the financial sector at the time, and having had the privilege of leading the
International Monetary Fund for eight years, which is in many instances the lender of last resort to
countries in difficulty, I know some of the facets of the work that is done here. I learn fast, I work
hard and I'm surrounded by exceptionally competent people. So to the extent that I can
sometimes challenge some of the conventional views and the sort of home-grown conventional
wisdom, I think it's very healthy.
Yes, it could be an advantage.
It could be.
You are the first woman to lead the ECB, which used to be a man's world. How are
people reacting?
I think they notice but I think they tolerate it and hopefully they will accept that I can do as good, if
not a better job than men would. I think that's the beauty of diversity and the openness of this
institution, actually, to accept, engage and respect differences and to try to include them.
Do you believe it's important that a woman is leading such a prominent institution like
the ECB?
Yes, I do, because I see too many younger women - not necessarily younger women actually -
but too many of my colleagues and friends and people that I meet in the course of everyday life,
who look up to me and say to themselves or say sometimes to me, "About time that a woman
does this job", number 1. Number 2, "If she can do it, maybe I can do it, too - and if not me then
my daughters maybe can do it." So I think that as a signal it's important. It honestly gives me, I
would say, additional responsibilities because I don't want to let them down. That puts an
additional weight on my shoulders. I have to honour that.
Also the European Commission is led by a woman now. Do you think that will make a
difference somehow?
I'm sure it will. When you look at some photos from the days when the European Union was set
up in the first place, or when you look at old photos - sometimes not so old photos - of the ECB,
of the Governing Council, it does make a difference, if only optically. But I also think that it brings
an added dimension, which is the sheer dimension of diversity of thinking.
But also in policy.
Oh, I think everybody brings...
Maybe risk-taking?
On risk-taking, I think, it has been demonstrated empirically now by a lot of analytical work that
has been done on the trade floor and in various circles, that the risk attitude is different. You see
that by the sort of rotation of portfolios, for instance, and that has been studied extensively. I think
we tend to have a different horizon and we embrace different priorities. And we have a different
look at risk, yes.
That's a good development. Let's talk about the ECB and the Netherlands, because in
the Netherlands there is a lot of criticism of ECB policy, especially the low interest rates.
It's not good for people's savings, for our pension system. How do you see this
criticism?
Well, first of all, I would like to say that I hear that criticism and I completely understand and
appreciate the concern that some people have. If you're saving, if you are at risk of receiving less
pension, obviously you are concerned and we should look at that. We should monitor it and we
should appreciate what is happening - and we do. I can assure you that it was done in the past
and it will certainly continue to be done, if not emphasised, going forward. But having said that,
our job, which has been given by Europe and the euro area in particular in the Treaty, is to
maintain price stability and to use tools that we can use in order to arrive at that. I think that what
has been done by the ECB is to use as many tools as are available and can prove efficient in
order to maintain that price stability which has been defined way back in 2003 as close to but
below 2%. Until such time when we arrive at this aim that we have, we need to continue using
the tools. Interest rates are one of them.
When I look backward, since 2014, there has been a lot of good development. If I look at your
country, for instance, in the Netherlands, where today you have about 9.3 million people at work,
from those 9.3 about 800,000 jobs were created as a result of the monetary policy and other
policies, fiscal and structural reforms. So it has been extremely useful to use those lower interest
rate policies going forward; that's point number 1. Point number 2, I realise that it's difficult for the
pension system, but it does not affect all pension systems in all euro area member states. So I
think it's also how each pension scheme is calibrated, organised, structured that is in question
and that needs to be looked at, because it affects one country, it doesn't affect others.
What I wanted to say is that even our President of the Dutch Central Bank is not happy
with the ECB monetary policy, and is so unhappy that he addressed it in a public
statement a couple of months ago. Do you understand his concerns?
I don't want to revisit the past because the past is where it is. I'm more concerned about what I
can do and how I can help, and how we can be attentive to delivering on our mission in
accordance with our mandate. Being attentive to all consequences on inflation, but on all other
items as well, including the negative effects. Number 3, I would observe also that ever since I
started on November 1, we have worked very cooperatively, very consensually, including with
Governor Knot.
You've spoken with him about this?
Yes, absolutely, we've known each other for a long time and we are very, very close to each
other. I know the problem that some of the Dutch people are concerned about, and I share their
concern.
Yes, but...
Don't forget one thing: very often a saver is also the owner of his house. Houses have increased
in value over the course of time.
Yes, but there is also a risk.
You can look at everything as a risk, everything as a benefit, and you're right; that the price of
houses has gone up. It's less accessible to young people. Maybe more housing would help in the
process. So while we have to set our policies at the euro area level, being attentive to each and
every member state as well, there are measures that can be taken at the national level in order to
address some of the negative effects.
Moody's concluded today that the Netherlands is at risk of a housing crisis. Is that
something to worry about?
As I said, the housing prices have gone up in many large centres in some of the euro area
member states, and measures can be taken in order to temper these price increases. I think it's
nine out of 19 euro area countries that have already taken specific measures to temper prices,
meaning reducing a little bit access to credit and providing conditionality so that there is not an
excessive demand relative to supply. I also think that supply measures could be in order and that
housing should be encouraged and developed whenever there is shortage and when supply
cannot meet demand.
Which brings me to another question: is it even possible to have adequate monetary
policy in the euro area when the differences between countries are so big? If we look at
inflation for example, the last six months, in the Netherlands it was 2.6% while the
European average was 1.4%. So is it possible?
It's the rule of the game. When the euro area was set up, when the euro was chosen, when we
see that people support the euro and like the euro as much as they do, we have to find the tools
and put in place the instruments to strengthen the euro area. Why are we short of banking union?
Why are we short of capital markets union, so that if I have a small enterprise in France, I can
actually borrow the funding that is available in the Netherlands and we can have a consistent and
deeper system of financing our enterprises. These are tools that we have to use to bring more
harmony, more consistency between the markets. It cannot be only about the monetary union. It
has to go beyond that to be solid and to be more efficient.
Does the weak economy in Europe worry you?
Clearly, growth is not at potential and hopefully by 2022 - this is in our forecast - we will be close
to potential, at 1.4% growth. We have to use all the tools. We will do what we have to do, but I
think that some fiscal policies should be applied and I'm very pleased to see that the Netherlands
are deploying fiscal policies in a very sensible and wise way in order to respond to the situation
and to use the space that is available without even touching the special reserve fund that has
been set up. But others should follow suit and should be inspired by the Dutch example.
About the Dutch budget surplus, as IMF Managing Director you always said that it would
be good if the Dutch Government spent more. Do you think the same, as the ECB
President?
This is happening because what I understand from the forecast for the next two years is that they
will develop spending on education, on infrastructure, on fighting climate change. This is exactly
what those countries that have fiscal space should do, and I think this is very, very welcome.
You still say the same, but our Minister of Finance...
No, I said that I admire what is being considered.
Yes, because our Minister of Finance, Wopke Hoekstra, was a bit irritated when you said
that we have to spend more.
I completely understand that he was irritated. We discussed that when we met at the Eurogroup
the other day, and he gave me full details of what the funds are and what the expenditures will be
and what the spending will be. I think it is very sensible to do that, particularly to invest in the
future productivity of the Dutch economy at large. I think it's great.
You said it just days before you started as ECB President.
So I was not yet committing the ECB.
So you understand his irritation?
I do. I always try to understand why people get irritated because then I can either explain my case
and argue it, if I think that it is right. But if it is not right and if I stand to be contradicted, I fully
understand that and I respect that.
You are getting along well now?
Yes, we do, absolutely!
Why should we spend more?
Because the world is changing, because we want to remain productive and competitive,
because the very nasty development that we see on the horizon had to be addressed and for
that, we need to spend money. We don't want climate change to damage our countries. We
want our kids to be educated. We want artificial intelligence to be something that they play with
on a regular basis. We want them to be stronger going forward. So to do that, investment is
needed.
Investment in the Green Deal, because it's not only about economic growth these days.
No, it's sustainable growth and certainly the Green Deal is remarkable in that respect. The 50
measures that have been identified by Ursula von der Leyen are good ones, but each country,
each member state has to sort of question its own public expenditure and ask itself: is that going
to make a difference for climate change purposes? How should I change it, if not? I think that the
Netherlands is clearly looking at those issues. Your country has always been very attentive to
nature around it anyway.
You suggested that the ECB also has a responsibility when it comes to climate change;
in what way? Your mandate is price stability, isn't it?
Correct, but to identify price stability, you need to assess risk, you need to forecast growth, you
need to understand better where the economies are going. And if you don't factor this into the risk
assessment and the forecast and the models that underline that, you don't take into account
climate change. You're missing a big chunk of the risks that are looming on the horizon and that
will be upon us much quicker than we think. So if only in respect of that work, we must take
climate change into account. Added to that, when we invest, we have to be mindful as well and
how we do that is being debated in our strategy review. Plus when we do supervision and when
we look at how banks are valuing their liabilities and their assets, we need to ask them whether
they take climate change risk into account as well. So there are multiple ramifications where we
need to ask ourselves: do I need to change? Is climate change really part of my thinking? I will
insist on that.
At this moment, the British people are voting. How important is the outcome for Europe?
I think the outcome that will close the loop of uncertainty that we have lived with for the last
couple of years is very important. Business people and any economic actor, whether you're in a
family or whether you're in enterprise, will tell you: "I need to know where I stand and what is the
environment where I will invest, operate in? If we don't know, then we don't invest. Then we don't
create jobs, then we don't trade". And that's what has happened a little bit with the UK, because
we didn't know and we still don't know to this day, what is the likely outcome. At the end of today
we might know a little bit more. It won't be final because we still have probably a transition period
which needs to be gone through, but at least some clarity will emerge out of tonight, I hope.
If Boris Johnson wins, Brexit will happen. What will be the effect on the European
economy?
There will be negative consequences in the short term for all economies, predominantly the UK,
and within the European Union some countries will be more at risk than others. Ireland is a case
in point which will be sort of first affected. The Netherlands might be affected as well because it
has a close relationship with the UK. Germany as well, the automotive industry. But clearly the
major impact will be on the UK.
Mario Draghi will go into history as the man who saved the euro. What would you like
your legacy to be?
I'm too young in the job to tell you!
Give us something...
I just hope that at the end of my term, the euro area and the euro system are even more relevant
than they are today.
In what way?
More relevant in that it will serve the Europeans consistently and better. It will bring them more
together and it will reinforce the unbelievable community that has been formed as a result of the
European founding fathers of way back, and the euro area founders of a few years back.
Christine Lagarde, thank you so much for this interview.
Thank you.