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France's Economy Minister Christine Lagarde addresses a news conference. (Aly Song/REUTERS/Aly Song/REUTERS)
France's Economy Minister Christine Lagarde addresses a news conference. (Aly Song/REUTERS/Aly Song/REUTERS)

Q+A with Christine Lagarde, French Finance Minister Add to ...

Q: After some sustainable recovery, would you like to see the French economy having less state ownership, less state involvement?

A: Yeah. Less state ownership, less direct involvement in the economy, less actual pushing and pulling economic players. But less regulation? No, I don't think so. More efficient regulations and a stricter set of rules - yes, for sure.

It is certainly my understanding, and my belief in economic liberalism, that a free market does not mean a market without rules. And the free market can actually survive and be sustainable if it has a proper set of rules, and the rules are respected and enforced, and if not, the players sanctioned. Which is why I believe that anti-trust councils, stock-market authorities and banking supervisors are absolutely key tot the functioning of the free market.

Q: A transaction tax, or Tobin Tax - a couple years ago if I mentioned it, this would have been obscure. Now Gordon Brown has proposed it at the last G20 meeting, Angela Merkel has spoken in its favour, and you would like to see it happen. Can the idea grow beyond Europe?

A: Gordon Brown sort of interrupted the G20 meeting and said, what about the Tobin Tax? It was not a spur-of-the-moment thing. And Chancellor Merkel actually had it inserted in the last G20 heads of government communiqué, that there should be something like this thought of for the financing of global warming.

The use of the fund is going to be the second big issue. The first big issue is how do you make it work - and we are all pulling out our hair and struggling to see how it would work and on which basis it would be built. And number two, what are we going to do with it? Because we've got people who want it for development, others who want it for global warming and with a strong environmental focus, and others are saying, wait a minute, we want a big insurance pool that will help us against any recurrence of the systemic risk.

Q: So we're spending the paycheque before we've got the job!

A: That's exactly right - it's like the lovely story by Jean de la Fontaine, which you may know [The Milkmaid and the Pot of Milk]- the farmer walks to the market with big jar of milk on her head, and she thinks, once I sell my milk, I will buy a cow and I will buy this and that, and she gets so excited by all this that she starts dancing, and this makes the milk fall off her head and spill, and all the dreams are gone.

So we don't even have the pot of milk at the moment!

Q: That's the thing - I don't exactly hear the United States government talking about transaction taxes.

A: No, I think Tim [Geithner, U.S. Treasury Secretary]was very bluntly sceptical about it, to put it politely. But, you know, consensuses are formed in funny ways. The Brits were not talking about it, either, until Gordon Brown suddenly comes up with it.

Q: Do you think there's a chance of progress on it?

A: At this meeting, I don't know, but a chance of progress, yes, I should think so.

Q: Some economists say this is the wrong time to be raising the cost of debt and capital.

A: The beauty of that tax as initially thought of by Tobin is that it is infinitesimal, but on a huge basis.

I think it's far more important that we set up a good clearing system and that we have a little less of that OTC business [over-the-counter trading]where no one knows what is going on. Once we have a good clearing system, then we know where and how the transactions are made and concluded. But until we do that, I don't know how we can control the flow.

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