Epiphanies From Christine Lagarde
The managing director of the International Monetary Fund on her frustrations with Congress, how the IMF saved Ukraine, and why her institution is poised to be more relevant than ever.
When Christine Lagarde took over the International Monetary Fund in 2011, the institution was in crisis. Its previous chief, Dominique Strauss-Kahn, had resigned amid allegations of sexual assault. But restoring the IMF’s profile wasn’t Lagarde’s biggest challenge at the time. That honor went to the Eurozone. Lagarde buoyed debt-distressed European countries, helping to negotiate a bailout deal for Greece and raising more than $400 billion for a global rescue plan. Credited with helping to save Europe’s economy, Lagarde is now leveraging the fund’s resources in other ways. This year, the IMF pledged $17 billion to Ukraine, and in September it committed $130 million in emergency financing to West African countries embattled by the Ebola epidemic. "If more is needed," Lagarde said at an October news conference, "it will be there."
FP Group CEO and editor David Rothkopf spoke with Lagarde in Washington, D.C., prior to presenting her with the magazine’s annual Diplomat of the Year award in late October. Lagarde discussed risks to financial stability, the IMF’s current international role and reputation, and her frustrations with lawmakers in the world’s largest economy.
When I arrived on July 4, 2011, I found an institution that was under shock. The precipitated departure of the previous managing director had occurred under circumstances that put the institution on the front page of pretty much every newspaper around the world. With staff that was discouraged and a bit at a loss as to where the compass was going to be. My first priority was, then, to try to bring people together.
I think the fund is and will be as relevant as ever, if not more. The decision to downsize the fund in 2006-2007 was very misguided. There are ebbs and flows. We have seen moments of economic euphoria, during which members suddenly question the relevance and necessity of the institution. Then comes the [economic] crisis, and everybody struggles to urgently increase their resources. At the end of the day, who is available in a very short period of time to put money on the table? Who is there to lend credibility to reforms that a country is prepared to undertake when it’s in trouble? Who is there to provide technical assistance of a high caliber? Bringing together donors and countries in need, it’s the IMF.
On Ukraine, everybody went, "Oh, we need to help," but then everybody scratched their heads as to how they were going to bring together financial packages. We were the institution that put $17 billion on the table and negotiated and eventually approved a program of reforms that Ukraine has to go through if it wants to restore economic stability and eradicate corruption.
Economic exclusion is a major risk. When you know that more than 800 million women around the world are held back for all sorts of religious, economic, cultural reasons, that’s an issue. When you see the number of young people, about 75 million of them, held back again because of high unemployment in many countries of the world, including in all the Middle East and North African countries, as well as in some of the European countries, those are really key issues.
The risks brought about by climate change are a major concern. It often goes unnoticed — unless people find out that 12 of the last 13 biggest climatic disasters have occurred in the last 10 years or they figure out that the actual rise of temperature will definitely exceed the 2 percent threshold that players had set for themselves five years ago. We have a group of countries here that are fragile states. They will be devastated by those consequences.
Congress and the executive branch are at odds with each other on a number of issues. One of those is the IMF’s quota and governance reforms, which were agreed upon by the G-20 in 2010 but have not yet been ratified by the U.S. Congress. It’s a sad reflection of a real dichotomy between the leadership that should be exercised by the United States of America, which still holds the international currency of reserve. It is still the largest economy in the world and the biggest player, yet it doesn’t deliver on its international commitment to multilateralism.