–Adds comments on global bank tax, financial instruments

PARIS (MNI) – The E30 billion contingency aid package for Greece
was agreed unanimously by all 16 Eurozone finance ministers on Sunday,
including Germany’s, and there is “no room” for disagreement or
questions, France’s Finance Minister Christine Lagarde said Tuesday.

Lagarde told anglophone journalists at a breakfast press briefing
that as far as she was concerned the deal agreed was clear,
straightforward, and definitive.

She said that Germany did not seek to impose higher interest rates
on Greece than the ones stipulated in the package. She noted that the
communique issued by Eurozone finance ministers about the deal did not
stipulate that Greece could only request assistance as a “last resort.”

Lagarde said the Eurozone finance ministers decided it was a good
idea to emulate IMF practices in setting the interest rate. The
contingency package would only be activated in the event that Greece
formally requested it, the ECB and European Commission concurred, and
all sixteen Eurozone states unanimously approved.

She said that bilateral loans from each individual EMU state would
follow national procedures. She noted that in France such a loan would
require parliamentary approval, but that such approval could be obtained
within a week.

Lagarde said that the Greece deal shows that the Eurozone states
can act in unity providing “a new mechanism” which could be used in the
future. “We are effectively forging something new,” she said, “let’s
hope we never need it again. But should we, certainly we have shown we
can close ranks, come together, and come up with an agreement to address
the situation.”

On the domestic front, Lagarde conceded that France’s plan to cut
its deficit to the EU limit of 3% of GDP by 2013 is based on a “very
ambitious forecast” for growth between 2011 and 2013. The French budget
plan assumes GDP will expand at an average clip of 2.5% in those years.

Asked to respond to European Commission criticism that the plan is
too optimistic, Lagarde took a backward-looking view, pointing out that
the French economy contracted by only 2.2% last year, compared to
Germany’s -4.9% and the UK’s -5.0%.

“We are not crisis-resistant, but we are certainly more
crisis-resilient than others,” Lagarde said. “I am hopeful that with the
reforms we have implemented over the last 2.5 years and growth kicking
in internationally and in the euro area, France can pick up the wind a
little earlier.”

She added, “we’ll have plenty of time later in June to demonstrate
to our partners and to the Commission how we will arrive at our deficit
cuts.”

She said that the pursuit of additional reforms, including an
aggressive reform of the pension system, “will actually change the
landscape.”

Lagarde predicted that the French economy will “continue to destroy
jobs in 2010,” although some sectors are already picking up this year.
“In 2011 we should see a clear recovery by way of net job creation,” she
said.

Lagarde said that with regard to competitive imbalances within the
Eurozone, “I insist on a two-way street.” Countries who have lagged
behind must undertake reforms to close the gap, she said. However,
taking aim at Germany, she said countries with surpluses should also “do
a little something.”

Asked about the potential for contagion of the fiscal crisis to
Spain and Portugal, Lagarde said that she saw “no relaxation” of efforts
in either country.

The French finance minister also called for implementation of a
global tax on banks, similar to the one being proposed in Germany, to
provide a rainy-day fund and a deterrent against systemic risk.

Right now, she said, “in the case of systemic risk, the deep pocket
is the state. I believe we have to address that issue.” She added that,
“if the tax were designed at the right level and the right rate on a
global basis, then we are setting up a global deterrent.” She said that
such a tax would have to be coordinated with bank capital requirements
and leverage ratios.

Despite her insistence that banks shoulder the burden for systemic
risk, Lagarde noted that in France, “our banks have not cost us anything
because we had collected E2 billion in interest on [crisis-related]
loans to the banks.”

Lagarde she had a “clear concern” about the proliferation of
derivative financial instruments circulating in the global system and
contributing to serious volatility.

“I will propose that a specific directive be set up for discussion
as soon as possible to address this issue,” Lagarde said. She also
proposed that Europe establish the equivalent of the United States’
Commodities and Futures Trading Commission, “which we don’t have the
equivalent of in Europe and which would be highly welcomed.”

–Paris newsroom: +33-142715540; bwolfson@marketnews.com

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