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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: Do you think there should be a move away from US dollars as the reserve currency?

A: It's happening anyway. Gradually, little by little, when you look at the reserves held by central banks around the world, there is very slightly a change. It's not a massive change, granted.

Q: Central bankers say the problem is that the Euro doesn't have any equivalent to the Treasury bill, and the SDR is insufficiently liquid.

A: That's a good point.

Q: So do you think there's a way forward, perhaps by pressuring China.

A: I don't honestly believe that pressuring anybody is going to give us any tangible, satisfactory result.

Q: So what happens then? This is a crisis we've been facing since the beginning of the last decade, and balance-of-payments imbalances were at the heart of the crisis.

A: I think that out of crisis, there are major difficulties and misery, but there are also opportunities, and now is the time, actually, post-crisis, after we mended the system so that it did not completely collapse, now is the time to give it a good thought, and a collective thought.

We have never been so much together - both at the G7 level and more importantly at the G20 level. Even though we don't talk currency at G20 - which is why I think G7 is not such a bad thing to have.

Q: So you think there is a consensus on the currency?

A: No, I don't think so, I think it's a question of trying to work on a consensus. On the one hand, the United States is saying 'our rescue plan is to export massively, and to restore employment' - well, if you want to export massively and restore employment, you need to manufacture at home, which means that you need to use the currency as your competitive advantage. So if the dollar is down relative to others, it's probably ok with respect to President Obama's economic policy. On the other hand, China is rebalancing its model a bit by better organizing its domestic market and trying to encourage consumption, yet it strongly relies on exports - and therefore there is no reason in the world why they should resume the movement they had started a little bit, up to a year ago, to revalue the yuan. That's why we need to talk about it - it's a big issue.

Q: Speaking of stimulating consumption , this is another area where consensus is being sought: When, and how much, to roll back the stimulus or begin paying back the fiscal debts for it. The United States has begun cutting, and some parties in Britain want to: Is there any hope of coordinating the withdrawal from stimulus?

A: We [in France]have a very simple policy, which rotates around three Rs: Recovery, Reform, and Restore public finance.

Recovery means we are going to continue spending, under the stimulus package that was voted last year, because we have organized it so that about 80 per cent of it was spent in 2009, and we still have 20 per cent to go. So we're not going to cut that 20 per cent. But we're not either looking at expanding the stimulus package or having another one. We believe that if we maintain the 20 per cent investment that is left under the stimulus package plus to not raise tax on consumers, this combination on one hand and stimulation of public/private investment should suffice.

On the reform front, we should just keep at it to make the French economy more flexible, more agile, more prone to picking up the wind of growth when it comes from the outside and there is demand addressed to the French economy.

And on restoring public finance, we just have to do it, because we have more than doubled our deficit in 2009, and we need to go back to business as usual from a public-finance perspective.

Q: Do you see real domestic demand returning?

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