–Says 2.5% Growth Target for 2011-2012 “Ambitious” But “Plausible”

PARIS (MNI) – France’s Finance Minister Christine Lagarde said in a
newspaper interview published Monday that she was sticking to the
government’s forecast of 1.4% economic growth this year despite a feeble
0.1% growth rate in the first quarter.

“Over the past two quarters we have had average [growth] of +0.3%,”
Lagarde told the popular French daily France-Soir. “We need to have 0.4%
in the next two quarters, and then we’ll be on target.”

Lagarde also said the government’s forecast of 2.5% growth per year
starting in 2011 was “ambitious” but “plausible.” France’s multi-year
budget plan, which projects the deficit falling below 3% of GDP by 2013,
from the 8% expected this year, depends on meeting that growth target.

“The lesson to be drawn is as follows: When you have abrupt
downward shocks, you often follow them up afterwards with upward shocks
that are equally abrupt.” Thus, “although it is ambitious, our objective
for 2011 is completely plausible,” she said.

Nonetheless, Lagarde said she was “very guarded about our
projections,” which she described as a “very difficult exercise.”

She said she was counting on a pick-up in activity this year from
the government’s recovery plan, of which “there is still about 25%…in
the pipeline.”

She reiterated that French President Nicolas Sarkozy had ruled out
“any measure to tighten the fiscal screws this year.”

Starting next year, however, France plans to begin its
deficit-cutting plan, a key measure of which is a three-year freeze on
public sector spending.

In a separate interview published Monday in Germany’s Frankfurter
Allgemeine Zeitung, Lagarde said she was “convinced” the euro would
still exist in five years, despite the turbulence it is facing now.
European unity is more important than ever as the global balance of
power shifts, she explained.

“Large developing countries are becoming considerably more
important economically and politically want to have a voice,” she noted.
“The epicenter is no longer somewhere in the Atlantic between the USA
and Europe.” Thus, “it would be a disaster if Europeans did not stay
united, especially in the important Eurozone, with its solid currency,”
she said.

Lagarde acknowledged that everyone is “annoyed” and “frustrated”
over the constant flouting of EU budget rules. “One needs to sharpen the
rules of the Stability and Growth Pact,” she said. She argued that in
addition to deficits and debt, the competitiveness of member states must
also be monitored and improved.

She rejected the accusation that the ECB’s independence has been
damaged following its unprecedented decision to buy government bonds,
which many suspect was taken under political pressure and fear will lead
to higher inflation.

“The ECB is still independent,” Lagarde insisted. Given the ECB’s
responsibility for the stability of the currency, it could not have
simply stood by while the euro collapsed, she argued.

On another topic, she said the question of who succeeds Jean-Claude
Trichet at the helm of the ECB is “not yet on the agenda.”

–Paris newsroom, +331-42-71-55-40; bwolfson@marketnews.com

[TOPICS: M$F$$$,M$X$$$,M$$CR$,MGX$$$]