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Greek crisis – France/Spain/Portugal – Greece/G20 – Bonuses/tax havens/Greek crisis/market regulation

Published on April 23, 2010
Interview given by Christine Lagarde, Minister for the Economy, Industry and Employment, to “L’Express” magazine (excerpts)

Paris, April 22, 2010



Q. – Has Germany been egoistic in the management of the Greek crisis?

THE MINISTER – No. What is important in this crisis is that it has led to the emergence of a new modus operandi for the European institutions. It is extraordinarily stimulating. On 11 April, we got together, i.e. the 16 Euro Area finance ministers, the President of the European Central Bank (ECB) and Commissioner for Economic and Monetary Affairs.

We made concrete progress, in the Lisbon Treaty framework, without giving ourselves headaches about whether we had to create a European monetary fund or call into question the [Euro Area’s] “no bail-out” clause. From now on there’s an operational solidarity mechanism which we can activate if necessary.

Q. – In the end, will the Greeks have to resort to this plan?

THE MINISTER – I don’t know. Their financing and cash requirements for 2010 will perhaps justify it. I note, at any rate, that on 13 April Greece managed to raise €1.5 billion, when her target was €1.2 billion. Greek securities have been very much in demand and the operation was a success. (…)


Q. – Do you think other countries are threatened? Where do you put France?

THE MINISTER – Spain and Portugal’s stability and growth programmes, for example, have been deemed serious. As for France, the financial indicators (interest rate spreads and value of CDS contracts) attest to the confidence of the markets: we are borrowing at virtually the same rates as Germany. We are enjoying the best possible rating, triple-A, an assessment on which there’s neither doubt nor equivocation.


Q. – The hedge funds have speculated massively on Greece going bankrupt, despite three G20s in 17 months. All that for that?

THE MINISTER – But the G20 played a critical role at a crucial moment. It’s been useful for three things. First of all, for avoiding the enormous blunders of 1929 by curbing protectionist temptations. Secondly, by getting the economic machine going again: around $1,200 billion was injected through the economic stimulus plans. Finally, by putting into action the principles of regulation and clarity essential to the operation of the financial markets. (…)


Q. – In two fields – bonuses and tax havens – haven’t States been a bit naïve?

THE MINISTER – France and the United Kingdom have brought in a tax on bonuses, for one year. The idea is the following: in 2009, the banks achieved good results thanks to public funds, even though this hasn’t cost the State or taxpayer anything at all. So a State levy is legitimate.

Now, there perhaps exist super remuneration consultants, geniuses in getting round rules, constructing brilliant ways of doing so. It’s possible! But the principle has been secured for good: we have seen its consequences in the dividends and remuneration packages announced in France. But everyone is now applying, permanently, under the control of national regulators, the Financial Stability Board rules, which provide for a bonus-malus system for trader remuneration (1). On tax and prudential havens (places which escape the supervision rules), the G20 has done something huge: first of all, almost every country in the world has agreed to lift bank secrecy. This is a historic breakthrough! Over 300 information exchange agreements have been signed, which is also historic. As yet, not all are in force. The Global Forum working group, headed by François d’Aubert, has been tasked with checking their proper integration into [each country’s] legislation.

It will now be necessary to make sure that the new rules are honoured. At the practical level, we will get the result of these assessments, and see where we are next year, under French G20 presidency. It is a labour of patience, a long-term job, but one we will have to make headway on. I hope I have convinced you!

The G20, like the settlement of the Greek crisis, has forced us to transcend the constraints. Breaking taboos, we have created something which works, with three summits in 17 months, taking with us countries like the United Kingdom and United States traditionally in favour of minimum regulation, convinced that the market will decide. It is a change of paradigm. Look: at European level, we have regulated the rating agencies, modified banks’ capital requirements. We are going to establish a regulatory framework for hedge funds, which didn’t have one at all. We are discussing better surveillance of derivatives.

The problem is that it is ultra-technical, it irks everyone, and people are asking us more where we’ve got to on tax havens. Yet these very complicated subjects are at the heart of the explanation of the crisis and we are in the process of laying the first foundations of a global governance, first of all an economic and financial, and perhaps subsequently a political one (…)./.

(1) ban on guaranteed multi-annual bonuses, deferred payment of a substantial proportion of performance-related pay and introduction of penalties.

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