FRANKFURT (MNI) – Given the risks posed by the sovereign debt
crisis, audacious policy action was required, French Finance Minister
Christine Lagarde said on Thursday.

The EU’s special purpose vehicle to assure fiscal support, as well
as the participation of the International Monetary Fund’s were the
responses, Lagarde said in an interview with Reuters.

“To actually go the first step with Greece and put together a
package worth E110 billion through bilateral loan agreements, that was
the first dent in the treaty,” Lagarde said.

“Going further and saying that we’ll put together a facility,
saying that we’ll guarantee it up to E500 billion and we will accept
that the IMF comes into the picture and plays a critical role in
designing the programs and making sure that they are delivered upon,
this is a huge change, because we want the euro to stand and remain a
strong currency,” she added.

The minister also stressed the need to for change, including firmer
sanctions against those states who do not comply with the Stability and
Growth pact.

Still, the minister highlighted that the Eurozone’s deficit as a
percentage of GDP compared favourably with major countries, including
the U.S. and Japan.

“Delivering against commitment will be key,” Lagarde said. “The
fact many European members are delivering against the expectations that
they restore public finance – they are each and every time proof of the
pudding.”

Turning to France, Lagarde maintained that the country would honour
its commitment to bringing down its deficit to 3% of GDP by 2013.
However, she acknowledged that the GDP growth forecasts, which were
factored into the deficit reduction timetable were “ambitious”.

“They are ambitious, some would say that they are audacious, but we
aren’t going to revise those numbers before August,” Lagarde asserted.
“Frankly, they are not unrealistic.”

“The crisis was so much deeper, that it’s difficult to think in
terms of analogies [comparing to previous crises]” Lagarde said. “We are
taking the ambitious approach. But, we’ll see how it goes.”

While economic growth in France is slowly returning, Lagarde again
stressed the need to “rein in deficits” and “tip-toe out” from stimulus
programs.

“That means gradually phasing out [the measures] over the course of
2010,” Lagarde explained. “Because we don’t want to break brutally [for]
fear of stoping and strangling growth.”

However, the finance minister added that gradual exit strategies
was not appropriate for all countries.

“There are countries where tip-toeing is not in order, simply
because the public finances are such a disorganised situation” she said.
“It’s obvious that a country like Greece cannot afford the tip-toeing
out. The Greeks “have to cut and restore the situation to bounce back.”

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