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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 ...

A: The production numbers are good, they're certainly on the upward side. Consumption has always increased from one quarter to another, we've never had a negative number as far as consumption is concerned. The area where we need to work hard is private investment, because that has dropped massively, by about 7.9 per cent in 2009, and our forecast is a slight improvement but not a major improvement. Because companies have started rebuilding inventories; temporary jobs is up; advertising budgets are up. Those are sort of anticipatory signals, but actual investment in capital expenditures or equipment is actually going to take a while. But the tax reform that is now in effect, the removal of the business tax, will help.

Certainly as far as Europe is concerned, we're all determined to do the two things: to continue to support the fragile growth we have at the moment with the tail of the stimulus packages, tiptoe out of that, and come back to sound public-finance management. That's the goal toward which we are all working.

Q: When the Germans are forced to withdraw their part-time employment support program, there could be trouble.

A: That will be interesting to see. The major success of Germany, as I see it at the moment, is that they had a big drop of growth in 2009, and yet they've managed to maintain the level of employment, and that's because of this program you're talking about. But they're going to have to decide, now, do we extend it by more than 24 months, which is the timeline against which they're running, or do they drop it, at which point I think the unemployment rate in Germany might shoot up and skyrocket - I really hope not, for them. As well as for us, because we're all in this together.

Q: Is France's high unemployment going to become a larger problem?

A: There will be a lag between the pickup of growth and the creation of jobs. We're sort of working against the clock in that respect - how to fine-tune the extended part-time employment-support scheme while encouraging the creation of jobs.

Q: France has the interesting program of lending mediation committees [government-appointed bodies which instruct banks to make loans to business] Has that worked?

A: Not only has it been a success, but I think it will be a survivor… my recollection is that about 180,000 jobs were secured and maintained because of the involvement of the mediator… it's been very efficient… the beauty of it was we appointed one person who relied on existing networks, the branches of the central bank in the regions, so he could multiply his effects - it was a matter of having a good team around him and good knowledge of local conditions.

Q: It sounded to some people like a government agency telling banks to make loans they wouldn't have otherwise wanted to make.

That was perfectly legitimate, because we were participating in the system at the banks' request. If it had been my choice, I would have much preferred using our money for other things than what we had to do. We had to kick-start the system of interbank lending, we had to reinforce equity by quasi-equity funds, we had to get in the [banking]business. And it was only legitimate if we actually made sure that at the other end, the output end, there were actual results.

Q: When you began this job, you could not possibly have foreseen this - that you would be increasing the government's role in the economy.

A: That's true. Very true. But it was necessary. Whether it is temporary or not is going to be the question for tomorrow. Is it actually needed, that the state is so involved? Or are we going to be sufficiently efficient and quick to the ball to put in place a set of regulations and gatekeepers so that economic actors actually go about their business respecting the principles of stability and security for their society?

I would hope so, because I am, economically speaking, a liberally-minded person. I'm not a state interventionist, if you take my point.

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