The following is the full transcript of an interview with Christine Lagarde, president of the European Central Bank, that aired on “Face the Nation” on April 16, 2023.
MARGARET BRENNAN: We’re joined now by Christine Lagarde, former head of the IMF, now the president of the European Central Bank. Good morning.
PRESIDENT OF THE EUROPEAN CENTRAL BANK CHRISTINE LAGARDE: Good morning, Margaret. Lovely to be back.
MARGARET BRENNAN: Good to have you here, and your recovery is going all right?
MADAME LAGARDE: Yes, in a couple of days, I think I’ll be fine.
MARGARET BRENNAN: I’m glad to hear that. You have a long list of things ahead of you. And I want to ask you about the global recovery. You were speaking a few days ago and you said the recovery for the economy is fragile and uncertain in this country. The Fed thinks we’ll see a mild recession later this year. What is it that you predict?
MADAME LAGARDE: First of all, there is recovery. That’s, I think, a point that was not really firm only six months ago where we all assumed that there would be a recession, if only a technical one. If you look at all the forecasts at the moment, it’s all positive. It’s been slightly downgraded. But overall, we have a recovery and we are faced with high uncertainty because of multiple factors, you know, from all corners of the world. It’s the war in Ukraine. It’s the financial stability that clearly has been shaken up a bit by the US and Switzerland development. It’s inflation that we are fighting. It’s all that which really create a hollow of uncertainty around a recovery that we want to embed. That’s pretty much where we are.
MARGARET BRENNAN: So there were those recent bank failures here in the United States, also one in Switzerland. Given that, it sounds like you’re saying you don’t see a hard landing, you’re seeing a positive trajectory for the global economy?
MADAME LAGARDE: I think we have a narrow path to navigate, which requires that both the governments and the central banks around the world adopt the right policies.
MARGARET BRENNAN: OPEC just cut output.
MADAME LAGARDE: Hm?
MARGARET BRENNAN: OPEC just cut output, but you don’t see that as a disruption?
MADAME LAGARDE: I know. And- and we have to be very attentive. But in the meantime, if you look at- I’ll have to look at Europe at the moment. We have reduced our overall consumption of gas energy, for instance, by more than 15 percent. So it’s not as if we negotiated here or there. We just cut down our energy consumption, number one. Number two, we have renegotiated with multiple partners ranging from Norway to the United States of America, which is a big supplier of our energy. And I think that our dependency, which we learned the hard way about, has significantly declined. So I think that we moved from the illusion of plenty of energy, free money, to a time of resilience and building buffers. This is what has happened.
MARGARET BRENNAN: It’s interesting to hear that optimism. I mean, given the bank failures we just saw, you hear from bank CEOs in this country, this idea that they’re getting more cautious about lending money, largely that there’s some contraction in credit there. How concerned are you and how does that complicate your planning?
MADAME LAGARDE: It’s funny you should ask, complication because in a way it facilitates my planning and it complicates the future as far as growth.
MARGARET BRENNAN: Because it slows down business activity so you don’t have to raise rates as much or as frequently.
MADAME LAGARDE: We don’t have to reduce. We’ll see. Because we need to really measure what will come out of this- this financial events that took place recently. What impact will it have? How will banks react? How will they assess risk and how much credit will they lend? But if they don’t lend too much credit and if they manage their risk, it might reduce the work that we have to do to reduce inflation, okay? But if they reduce too much credit, then it will weigh on growth excessively. So it’s a fine balance to have between credit risk, good management on the one hand, and on the other hand, financing the economy as is expected by- by the business community. The business community wants to invest at the moment. Some of them have big buffers and they can use those buffers, others are going to need credit financing from the banking sector and the markets, both of them.
MARGARET BRENNAN: I want to ask you about the U.S.. And it’s not a political question, it’s an economic one. But there are predictions that the U.S. could default in its national debt as soon as June, some say September, and we have a political standoff in this country, virtually no negotiation happening on how to resolve this. Does that undermine your confidence in the United States? And what message does that send to the world?
MADAME LAGARDE: I have huge confidence in the United States. You know, ever since my year in this country, and this city in ’73, ’74, I have had confidence in this country and I just cannot believe that they would let such a major, major disaster happen of the United States defaulting on its debt. This is not possible. I cannot believe that it would happen. But if it did happen, it would have very, very negative impact, not just for this country where confidence would be challenged, but around the world. Let’s face it, this is the largest economy. It’s a major leader in economic growth around the world. It cannot let that happen. I understand the politics, I’ve been in politics myself. But there is a time when the higher interest of a nation has to prevail. I’m sorry.
MARGARET BRENNAN: And you think that will happen?
MADAME LAGARDE: I have huge trust in this country yet again.
MARGARET BRENNAN: You’re bringing a lot of optimism to a show where we don’t have a lot of optimism.
MADAME LAGARDE: Oh. I’m sorry (laughs)
MARGARET BRENNAN: No, I like it. It’s interesting. It’s a change. I want to ask you, though, about what you just said in terms of U.S. leadership. You look to the other side of the globe and Xi Jinping has said he wants China to be the world’s leading power by 2049. And Beijing is very interlinked into so many economies, particularly in Europe. Is the U.S. losing global influence?
MADAME LAGARDE: There is clearly a competition between these- these large economies. The U.S. is the first economy in the world. China is clearly competing, and is putting all forces in that competition. I think competition is healthy. It has to stimulate innovation. It has to stimulate productivity. But it’s inevitable that these two large economies are facing each other. What I hope very much is that they can have a dialogue because, you know, all these relationships, whether it’s trade, whether it’s politics, whether it’s economic development, whether it is financial stability, it’s a two-way street. We cannot ignore each other, and trade should not be confrontational. It has to be careful. It has to identify the areas that are strategic for one country or the other- or all the others. But it shouldn’t be confrontational. I’m on the same page as Henry Kissinger on that, or Kevin Rudd, the new Australian ambassador. Conflict is not unavoidable.
MARGARET BRENNAN: But there is, it seems, increased political pressure to choose between the United States and China in many ways in some of these political capitals. Is that even practical from an economic point of view?
MADAME LAGARDE: It would lead to economic downside, the amount of which is uncertain. Is the global economy going to be affected by one or X percent? There are multiple forecasts, all of them are negative. So the decoupling and the sort of bipolarization of the world would lead to less economic growth, less prosperity in the world, more poverty across the world. So I think that this is something that should be by all means avoided.
MARGARET BRENNAN: Madame Lagarde, it’s always wonderful to have you here. Thank you. We’ll be right back.
