–Says Federal Reserve Easy Money Policy Not Helping “Anyone”

PARIS (MNI) – A double-dip recession in Europe is not on the cards,
but it’s harder to tell in the United States, France’s Finance Minister
Christine Lagarde was quoted as saying in a column published Thursday in
the New York Times.

Asked by columnist Roger Cohen about the chances of another
recession, Lagarde replied, “Not for Europe. I don’t know enough about
the United States to pass judgment. I would hope not.”

But Lagarde, who worked for years as a senior partner at the
American law firm Baker & McKenzie, expressed serious reservations about
economic and financial events on the other side of the Atlantic.

“I am more concerned about the U.S. economy than the French,” she
told Cohen. She cited the “structural de-leveraging” in a global economy
that had been “driven by high U.S. consumption.” The employment picture
is “not reassuring” in the U.S., she said. And she lamented that Federal
Reserve monetary policy, while “understandable,” is “not helping
developing countries or emerging markets or anyone.”

On the domestic front, Lagarde said the French government will
“hold firm” on its plan to raise the minimum retirement age by two
years, despite widespread protests and strikes that have gained momentum
this week, hampering public transport and threatening to shut down oil
refinery production.

“There are 15 million pensioners — every year we add another
700,000 — and already 1.5 million of them, or 10 percent, receive
pensions financed by debt,” she noted. “We just can’t go on like that.”

The government’s pension reform bill, which has passed the lower
house of the legislature and is now working its way through the upper
house, would bolster annual GDP growth by 0.3 percent and cut the public
deficit by 0.5% of GDP starting in three years, she asserted.

She said passage of the reform in face of the protest “is a key
test of France’s ability to be sensible about its public finances,
sensible about grabbing the future and not taking it on credit.”

Asked what lessons she drew from the financial and economic crisis,
Lagarde replied: “Greed is everywhere. I think we can collectively lose
the moral compass without even knowing it. We came very close to
collapse, to a place where all circuits were empty and value had
evaporated, with people saying, ‘Where’s my money, where are my
savings?'”

So, “you had better have your vegetable garden,” she added,
pointing out the window to the yard of the restaurant where she and
Cohen were dining.

The columnist said she expressed some anxiety about her future in
the government of President Nicolas Sarkozy, especially since he’s
promised a cabinet shakeup for this autumn.

Asked if she might be named the next prime minister, she replied:
“I don’t have a clue. [Sarkozy] is the one who decides. It’s all a bit
unsettling. You don’t really know if at the end of the month you will
still be around.”

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

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