christine lagarde : interview with france 2 interview with ms christine lagarde, president of the european central bank, conducted by mr jean - paul chapel and broadcast on 24 january 2020. * * * good morning, christine lagarde. this is your first television interview in france since taking up your new position at the european central bank in november. thank you for giving it to france 2 and telematin. french people knew you as the minister of economy and then as managing director of the international monetary fund ( imf ). and now, as head of the ecb, you have an even more powerful role and the financial markets scrutinise everything you say. do you have to weigh every word? you have to speak sparingly enough for your message to remain solid and credible. and central bankers obviously have to be careful in sending out signals because financial markets and analysts are watching and will draw certain conclusions in order to decipher what they should focus their efforts on and where they should move their funds to. let me briefly touch on france. today is a day of strikes in protest against the pension reform which will be presented to the cabinet today. are you in favour of this pension reform? at the moment i am not in a position to assess the structure of the text. in terms of price stability, of the main economic indicators, we know it ’ s important for each and every citizen to have enough certainty as to what will happen when they retire in 10, 15 or 20 years ’ time. so any reform that helps bring about that certainty and clarifies the future retirement landscape, and which does not generate any inequality, will be good for economic policy and for monetary policy. and that applies to all products involving future payment or returns. turning to monetary policy now, to the interest rates that are set by the ecb. these interest rates are persistently low, practically zero. so europeans are earning next to nothing on their savings. in france, the interest rate on the livret a is 0. 5 % and the return on life insurance is not much better. inflation is eroding the savings of those on the lowest incomes. that ’ s true. both rates need to be seen in parallel : the rate of return and the rate of inflation. above all, we need to ask why the rates are low. we are in an environment, in europe but also in all of the advanced economies, where the rates are generally low and have fallen

suffering from higher debt. in this connection, a higher public debt level could entail a more ricardian form of conduct by european consumers and that, in turn, should discourage fiscal activism. 4. conclusions in conclusion, if monetary and budget policies appear to be different on the two shores of the atlantic, and indeed have been in terms of gradualism and activism, the reason does not necessarily lie in differences of conduct on the part of the economic policy authorities, but in differences in the way the economies are structured and in how they function. let us take a look at the current monetary policy stance in the two economies, where the policy interest rate has been brought to 1 % in the us, 350 basis points below the level one year ago, while in the euro area it was reduced to 3. 25 %, just 75 below the levels of one year ago. anyone who, in comparing the different stance of monetary policy between the us and the euro area, fails to take into account the differences in economic structure and in the shocks hitting the two economies is making an error of judgment. in particular, the us economy has been hit by a major slump in the real estate market, which in europe is restricted to only a few countries. the financial crisis, that started on the other side of the atlantic but it has propagated rapidly on our side, is having a bigger impact on the us banking system ’ s capability to convey financing to non - financial firms on account of the different financial structure. to give you just some data, if we compare the result of bank surveys in the euro area and the us in october, we see that the percentage of banks adopting tighter credit standards with medium and large corporations has risen to 84 % in the united states compared with 68 % in the euro area, and where residential mortgages and home loans are concerned, that figure stands at 69 % in the united states as opposed to 36 % in the euro area. that said, the european economy, which is also suffering a major slowdown, shows a great deal of inflexibility on the supply side, with a big drop in productivity and persistent unit labour cost dynamics, which instead remain more moderate in the united states. inflation could thus drop more slowly in the euro area, especially in its domestic component, and have a more serious impact on employment. for example, in the second quarter of this year wages increased by 3. 1 % in the us, more or less in line with the 3.