Christine Lagarde

Europe is recovering from its economic slowdown. So as we now look at the post COVID environment, what would you say is the situation in Europe. Is Europe recovering more rapidly or not quite as rapidly as you thought from the COVID uh pandemic. Actually, David, Europe is recovering more rapidly than we had anticipated, and we have as a

result of that, significantly upgraded our projections. So our projection fall this year is plus five so it's a significant upgrade plus four puscent four point six percent next year and back to sort of pre COVID type of growth subsequently. But this year is certainly going faster than we had thought, to the point where we will have recovered two pre COVID nineteen levels before the end of the year one. We had anticipated it would be early twenty two at best.

It's not going to be in twenty one. Well, are you worried about the delta variant impacting what you've just said or the show called move variant, which is now something that's on the horizon. It's it's very closely related. We used to say that the best economic policy was an accelerated vaccination rollout. Well, we are still in that situation where vaccination matters enormously, but on that front, Europe

has done quite well. We have more than seventy of the adult population that is completely vaccinated in the your area, and some countries are doing actually better than that. In excess of that, that has been a significant boost for growth and it has helped governments not go back to the stringent containment measures that we had seen previously. So

during COVID, were you working remotely? I mean, were you running the European Central Bank from one of your homes or from a home somewhere, or were you really going into the office. I spent quite a few weeks stuck in my Frankfurt apartment during the first wave of COVID, and actually the very sizeable package that we put together for monetary policy purposes was engineered around my kitchen table. Subsequently, when traveling was more flexible and we could move out,

then I went to the office a bit. But in the main, you know, the the by default solution is remote working still today and probably until the end of January, and then we will see, well you should take that kitchen table move at your office obviously was very productive, right, So let me ask you post COVID, do you expect Europeans will go back to work at the same levels before in terms of coin to work five days a week or where people work four days a week, one

day remotely or just four days a week of work. You know, first of all, we should all acknowledge that there are people who do not have the luxury of choice that have to go to work because their physical presence is required. You know, you think about hospital staff, you think about construction workers, you think about some people working in shops. They don't have the choice. They have to be on site and at work and showing up

in you know, offices. I think we are heading towards a hybrid movement where part of the week will be spent in the office so that people can meet, can see each other, can hold regular meetings, and and have face to face contact, but the rest of the week will likely be working from home. So whether it's fifty, whether it's is up for debate, and it's going to be handled at company levels, I suppose, because most of the legal constraints have been lifted at this point in time.

But people have learned during the pandemic and those learnings will be bottled in and used for future, for future way of working. So around the kitchen table that we just made famous, you were talking about you put together a package that was designed to make Europe solve their economic problems as it dealt with COVID. The United States had a similar package. Um in hindsight, would you say the package worked as well as you thought, not as

well or better than you thought. Yeah, you know, when we put it together, we we were hopeful that it would work. But you you know, the truth of the pudding is in the eating, and it was a matter of days before we really appreciated that message was received. Fiscal authorities began to act in tandem and in good

coordination as well. And I think the impact of Next Generation EU when all Europeans decided to go and borrow together jointly, this this, this entire package actually responded well and fast and big to the unbelievable crisis situation that we faced. So all in all, I think it worked well, and it's certainly we responded I think faster and better than we had in two thousand and eight and then in two thousand eleven in the European sovereign debt crisis.

In the United States, not just AIG the United States all the time, but it's the country I'm most familiar with. We've had some challenges during COVID that people who were minorities, often women, people of lower income strata, they couldn't get access to broadband, they didn't have that, and they had childcare problems and so forth, and it's thought that they fell further and further behind. Did you find the same

phenomenon in Europe. Yeah, this has been the case in Europe as well, where inequalities in terms of opportunities, in terms of facilities have been aggravated and probably exacerbated by COVID ninety for the reasons that you've mentioned, those people who was hit by pandemic, where women, where young people, where people on fixed uman temper contracts, and and those you know, we're more remote from work than than the others.

And if you look at those who lost their jobs, it's predominantly those, those women and young people in particular, in disproportionate amount relative to the others. So as you look at the European economy today, what would you say it's single biggest challenges and what would you say it's single biggest opportunity is I think the single biggest challenge always is to deliver, is to implement. There lots of

good intentions, but implementation sometimes is hard. I think the second difficult area that will need to be tackled is this issue of inequality, because COVID nineteen has aggravated inequalities. The third one is climate change, where we will have to transition probably faster than we think, which will imply transition cost, which will imply a change in the overall structure of our economies. I would say those three implementation,

inequality and and climate change. And what has been the impact on the European Central Bank or the European economy if any on Brexit, has it been as bad as some people predicted, or have been better than people thought? What would you say? I think the conclusion varies depending on which side of the channel you're on. You know, from our perspective it it's a sad development and we certainly have lost the benefits of excellent cooperation with the

Bank of England. We try to continue to maintain a good relationship because because you know, we have lots of links between us. But in terms of trade it has been certainly a loss for the UK more so than for Europe, and and we'll see how it goes. All I can say is at this point in time, Europe is coming out of the crisis. Were not with flying colors yet because a lot of work needs to be done, but strongly than we had expected. I think the UK

is having a more difficult time at the moment. Part of the you help deal with the situation in Europe post during COVID was that you had the package that you referred to a very large package of financial stability package. But that package really involves countries borrowing money against against their their own abilities to pay it back. You are in effect not a guaranteur, but you are making certain

that that they probably won't default. But are you worried about too much debt among European countries, too much debt in France or Germany or Italy or is that not a big problem right now? You know? I think all countries around the world increase and had to increase the debt relative to GDP. And when you had this high debt increase and and a big fall in GDP, for of course, you end up with those ratios that look that look um higher and are higher than what they

experienced before. But there was no option and no choice but to do that. Um how did it not happened? I think the story of the pandemic could have been a lot worse than what we've seen. So now it's a question of directing the the financing to the right investment, making sure that the economies are going to bounce back in the right shape with the right structural reforms that will improve the productivity of those economies, that would position them to be more digital and to to be to

be greener. And I believe that this next Generation EU, which was voted a year ago now is going to help with making countries better converge and reduce the gap that existed between some of the southern European countries and the Northern European countries. That is certainly the intention. Recently, you said that you would like to have a goal, a target of getting two percent inflation. Why has it been so difficult to get to that level for the last five, six or seven years or so in Europe?

And how confident are you that you can get to two I think there multiple reasons for that, David, But certainly what we decided to do was to have a target which was simple, which was easy to understand, that was a symmetric, and that also was focused on the

medium terms. So those were the three attributes. So instead of having that complicated close to but below two percent, which was a bit uncertain and fuzzy, and which included somehow an implied biased, we decided that we would go for something straightforward simple two percent, two percent symmetric, so deviation up or down from two percent are equally undesirable. That's the definition that we have agreed upon. And we are also on on this medium term, which matters more

us because we are particularly concerned about inflation expectations. I think that's that decision plus the forward guidance that we also decided a few weeks after the strategy review of the European Central Bank was released, was convincing enough so that markets and and analysts and observers have appreciated that we are serious women in business. We want two percent.

Uh And you know, I mean there are lots of subtilties around the two percent and the lower band, which which leads us to having a more forceful response in some instances. But yes, women in business, and we mean two percent for sure. So for hundreds of years, governments and central banks have issued currency, and the currency is used for things to buy things, sell things, and so forth, enter price assets. Now some people have come along and

invented various things called cryptocurrencies. Central banks are trying to adjust to what that means for am So do you think that cryptocurrencies are a plush for the global economy or is it too early to tell? Cryptos are not currencies full stop. Cryptos are highly speculative assets that claim their fame as currency. Possibly, but they're not. They are not.

I think we have to distinguish between cryptos that are those highly speculatives um suspicious occasionally and high intensity in terms of energy consumption assets, but they're not a currency.

On the other hand, you have those stable coins that are beginning to proliferate, which some big texts are trying to promote and push along the way, which are a different animal and need to be regulated where there has to be oversight that corresponds to the business that they are actually conduct irrespective of how they um name themselves.

And in all that, you have the central banks who are prompted by demand of customers to produce something that will make these the central bank and central bank currencies fit for the sanctuary we're in, which is why we're not all looking at CBDC central bank digital currencies, so that instead of having banknotes and cash in our pockets are in our wallet, we can have exactly the same

thing but in a digital form. So all of us are working on this, and certainly I was keen to push the CBDC issue on our agenda because I believe that we have to stand ready for that. So if the ECB, like the Federal Reserve, also looking at it, If the ECB were to have a digital currency, would that be to the exclusion of paper currencies, or it would be up side by side, side by side, because

we want customers to have their preference. If they still want to hold those banknotes and cash, fine, and it should continue to be available and a run. You serve two terms at the head of the IMF, and you could have shared another term if you'd wanted to do so. How do you compare the pleasure of running the i m F with the pleasure of running a European the

European Central Bank. Is one more enjoyable than the other, or one's less enjoyable than the other, or basically they're both great jobs and you're happy you have had both of them. Maybe I'm extremely privileged to have had the role that I had as head of the IMF, and we saw each other quite often in those days, and you know how much I put my heart, my brain and and my my whole energy into the job, and

and I've enjoyed it tremendously. I'm doing the same thing with the CB, and I'm doing the same thing on the European scene. And you know, it's in times when you see geo political opposition, in times when you see some some energy withdrawn behind im borders. It's important to have this this desire to unite and to bring consensus to the table and to um you know, convince people that what we're doing together united is going to be stronger than what we will do individually in our little corner.

So I'm enjoying what I'm doing as well. It's hard. It's hard, let's face it, but but I'm enjoying it well. When you were the head of the i m F, you were the first woman to hold that position. Now you're the first woman to hold the position of the head of the European Central Bank, so you've obviously broken through in many cases. You also the head of your law firm and your first woman that had your law firm,

a large international law firm. At this point in your life, do you feel discrimination against you in your professional life as a woman or do you think discrimination generally is received against women in the professional workplace. I think discrimination has not receded, David, and I'm not I don't want to take my personal situation because when you have traveled the journey I have traveled, it's difficult to hold open

discrimination against me. Let's face it, but I'm very very much aware of discriminations against many women, many young women, many women in all parts of the world. And I'm particularly I'm sorry to say, I'm particularly thinking of the Afghan woman at the moment, who clearly are suffering the worst possible nightmare and sent back in in in the in their history and in their life. So it's a

constant struggle. It should be a constant fight of all of us to make sure that everybody has a chance to accomplish their talent and to develop they they the activity in the way they want. And this is certainly not the case yet. And look when I sit at my governing council table and I look around, I see twenty three men and one woman in add and to me, so two to twenty three is not a very good ratio.

And in the finance world, I don't know whether you would call it discrimination, but there is certainly disparity between men and women. If you look at the venture capital world, it's the same. If you look at CEOs of large international banks, it's the same. If you look at Parliament, you have a much lower representation of women than they all women in society. So something is not working. Now.

Central bankers are famous for not talking in language that the average person can understand generally, and sometimes they've done that on purpose. You talk in a language that everybody seems to understand. It's very simple and so forth. Is that a conscious policy that you have that kind of makes what you're doing understandable to the average person. Yes, yes, David, I think I think it's it's extremely important that people understand what we're doing. A lot has to do with trust.

If some but it talks to you in a completely obscure and jargonic language, how are you going to trust that person? So it's it's to me it was critically important to agree with the Governing Council members that we would communicate in a more understandable, in a clearer and

simpler way. So, just to give you an example, after each Governing Council we issue a monetary policy statement, well, we committed to keep sentences short, to have one idea of a sentence, to make sure that the you, the words that we use are understandable by you, of course, but a normal person as well, and uh and and we measure that and we try to stick to those principles and and will be held accountable. So do you think your ability to do that, and the Federal Reserve

Chairman j pal is interested in that as well. Both of you are trained as lawyers, um, so do you think that lawyers. I'm trained as a lawyer too. Do you think there's a greater future for central bankers to be headed by are to be lawyers and there's some hope for me to be a central banker someday or not? Really, I'm sure you would thrive. And I think I think I strongly believe in diversity, David, as you know, and the diversity has not all to do with gender, with minority,

with the sexual orientation or whatever. It also has to do with the background, with the training, with the culture that you carry with you, and to bring it all together around the table with diversity, in my view, improves the quality of the decisions that we make. And I learned a lot from my colleagues, brilliant economists, and I hope they can be patient with us poor lawyers. Two final questions. One, I would like to know what is the pleasure of being the head of the Central Bank.

You obviously have to work seven days a week. You did that for many years in your career. The map as well what is the pleasure you get out of heading the European Central Bank? And it's the same kind of pleasure that I take in leading other organizations. Is making sure that people around me are doing the best they can for the organization, are delivering on their mission, and that reform a team heading in the same direction,

so that that to me means an awful lot. So my final question is really this, You, as in your youth, were a synchronized swimmer where you have to I guess, work very closely with teammates and get everything working together quite nicely. Um, is it the case that when you're you're doing the central banking role you have to have the same kind of skill set. You've got all these central bankers that are of each country, you have to

get them to work together. So do you think you're synchronized swimming skills actually come to help you as the head of the European Central Bank? Yes, they do, actually, because what you learn in synchronized swimming is that, uh, if each individual is brilliant, it's great, but if they don't work together, you will not get the gold medal. So working together as a team actually matters enormously. And I've tried, and I will try to continue doing so.

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