In two years as managing director of the International Monetary Fund, Christine Lagarde has steered the agency beyond the arrest of her predecessor and helped engineer its largest and perhaps most controversial program — the rescue of the euro zone. Criticism has been intense, with the IMF blamed — and accepting partial responsibility — for pushing the region into recession with its recommended austerity measures and for not being forceful enough in securing early debt relief for Greece.
Lagarde has been stymied on other fronts: Plans to hand over more power at the IMF to developing countries is stuck, pending U.S. approval. But the euro crisis has eased and the global economy growing. The big issue now is how the world will transition to an era when central banks start reducing their crisis-driven support programs.
The former French finance minister chatted recently in her office about the outlook for central bank withdrawal, lessons learned from Greece and other topics.
To what degree are you disappointed in U.S. leadership on the governance issue and the fact that this is still lingering?
The organization functions. We have been able to significantly increase our resources and our capacity to engage, moving from a little over $300 billion to over a trillion dollars — notwithstanding the fact that the U.S. did not contribute or support that move. We have been able to respond to the demands of the membership. Whenever support was expected, we have delivered. And it is really only on the governance reform . . . that we have been stuck. If anything, it has undermined the position of the one member whose ratification would trigger the governance reform implementation and the quota increase. I think everybody would like to complete the process. Let’s face it. It has been around a long time.
You came in from the French Finance Ministry with a certain perspective on what needed to happen in Europe. Looking back on the European program and criticisms of that and earlier, parallel criticisms of the IMF through the Latin and Asian crises, do you see any clear reform needed in the way these issues are handled?
It is the fate of this organization to be criticized and to be seen as a negative force at the time it prescribes . . . reforms, fiscal consolidations, in consideration for loans. That is what happened in Latin America, in Asia and in Europe. We intervene at a time when no other tools, no other methods, no other political coalition has been able to restore the situation. We come in as the firefighter. We come in as the doctors, if you will. And the prescription we give is resented. That is very much part of our fate.
I have been unbelievably encouraged in my traveling in Asia but also in Latin America at the reaction of some political leaders who have said, ‘Thank goodness the IMF was there to help us rebuild, recapitalize our banking system, consolidate fiscally, reorganize our economy.’ I think that if there is one institution that needs to be judged ex post — and sufficiently ex post that countries have been able to judge the results — it is the IMF.