Interview with Christine Lagarde, conducted by Dominique Lecoq and Marc Aubault on 29 July and published on 31 July
31 July 2020
How has the coronavirus (COVID-19) crisis affected you personally? And where have you been? In Frankfurt? In Paris? Or in Normandy?
I was based in Frankfurt, of course, and have spent most of this period in lockdown. I was in Frankfurt for eight weeks straight. At that time, all of the bank’s staff were asked to telework, and I have been teleworking, too. We’ve organised most meetings, including Governing Council meetings, via teleworking. To give you an example, the €750 billion plan was decided on 18 March 2020… at my kitchen table! People picture large boardrooms with men in suits, but that’s not how it is…We’ve explored every technological avenue to keep working remotely. With hindsight, it’s worked fairly well.
This has been an especially intense time for me. We acted swiftly as the first line of defence in a situation where the economy was giving way beneath our feet. We were rapidly confronted with huge liquidity demands.
The ECB has taken strong action. You already talked about it – launching a “pandemic emergency” asset purchase programme to the tune of €750 billion, which you increased to €1,350 billion in June. It has also provided more than €1,300 billion of loans to European banks at negative rates…
The €1,350 billion of asset purchases make up a temporary, flexible envelope that has a very important role – it aims to stabilise the euro area economy and avoid financial fragmentation.
As for the envelope of loans, not all of it has been allocated yet. These are targeted loans for the real economy, with very attractive rates. We want to encourage banks to continue lending in the same volumes as they were before the crisis. At the same time, the French state – like other euro area governments – has provided guarantees for these loans. It has said to banks: “If you lend to company X, we offer you our guarantee against the risk of default, and the ECB is allowing you to fund this loan at a very attractive rate.” So banks reap a double benefit here: ECB funding at very low rates, and a state guarantee. This means there is minimal credit risk. It had to be done. Otherwise there was a risk that the banks would turn off the taps. So with the banks as an intermediary, relaxing our financing conditions benefits small and medium-sized enterprises and the self-employed as much as large companies.
Despite all of this support, Léa Lassarat and Vincent Laudat, the presidents of the Seine Estuaire and Rouen Métropole Chambers of Commerce and Industry (CCI), are concerned that micro, small and medium-sized enterprises will go bankrupt in the autumn, and that large companies will struggle in 2021. What do you say to local and regional employers about these concerns?
This is a real risk. Which is why the ECB decided in June to increase the volume of its asset purchases from €750 billion to €1,350 billion, to continue these purchases at least until June 2021 (the original end date was the end of 2020), and to reinvest the maturing securities at least until the end of 2022. We should envisage support continuing beyond 2020. We really have to maintain a safety net and very attractive conditions at least until June 2021.
You said to the Washington Post that female politicians had done a better job of managing the COVID-19 crisis. How do you explain that?
Perhaps for historical or sociological reasons, I don’t know, women have developed an array of specific talents that are indispensable in crisis situations.
It is essential that more women are included in politics and economics, including at the highest levels. Among the leaders who have managed the crisis well, the proportion of women is much higher than the proportion of female leaders overall. That is a fact. But I’m not excluding men, some of whom have also managed the crisis very well.
You also want the ECB to participate in the fight against climate change…
Everyone should ask themselves what role they can play in the fight against climate change. What goes for individuals in their day-to-day activities also goes for institutions. Institutions should ask themselves how they can participate in the fight against climate change, which is one of the greatest threats to our planet and to future generations.
Institutions like the ECB produce economic analyses, provide banks with funding opportunities and purchase assets. In all of these areas they can think hard about how to incorporate climate change considerations.
The first area is economic analysis. If we don’t take climate change into account, how can we draw up our projections? The increased frequency of major natural disasters and the sharp increase in insurance premiums, for example, have a direct impact on economic projections. The effects of climate change will have implications for price stability and inflation, which lie at the heart of the ECB’s mandate.
The second area is bank funding. We should be able to ask banks if they have considered climate change in their loan assessments. For example, four large European banks have decided that they will stop financing coal production by 2030. Firms will need to be supported in making their transition. But financing fossil fuels will become more costly.
The third area is asset purchases. These fall into three groups: the ECB’s own portfolio, the retirement scheme for ECB staff, which is already very green, and the large asset purchase programmes. As part of our strategy review we will explore ways of taking the risk of climate change into account.
Where does your green sensibilities stem from? From the Pays de Caux countryside where you have your home?
I’ve always been close to nature. I have lived in Hautot-le-Vatois for more than 30 years. The house belonging to my mother, who came from Normandy, was “across the water” [across the River Seine]-. My grandmother was originally from La Couture-Boussey in l’Eure. When I was small, we used to fetch milk from the farm in a jug and look for eggs in the henhouse. I called my grandmother “Mamie Cocotte”. And I often went camping in the Normandy countryside with the Brownies and the Girl Guides.
What is your attachment to the Pays de Caux?
For me, the Pays de Caux represents my whole childhood and adolescence. My parents arrived here when I was just two or three years old.
What are your favourite spots?
My house, in Hautot-le-Vatois, in the heart of the Pays de Caux. It’s a place I love dearly and where I feel very happy. I am surrounded by very kind neighbours who have become almost like family. When I was a lawyer in Paris, I returned here every weekend. I would travel by train with my two sons and return on Sunday evening. One of my sons has always loved this place. When my other son was around 16 or 17 he found it a little too isolated … But he got married recently and came here with his wife during the lockdown. After two months, he said to me: “it’s absolutely marvellous!”. He has fallen in love with it
I also love going to Saint-Valéry-en-Caux, Veules-les-Roses and Veulettes-sur-Mer, to eat mussels and frites while enjoying the sea view. And Varengeville-sur-Mer! It’s a divine place. That’s where I would like to be buried.
And we could come across you in Yvetot where you often do your shopping. Like this Wednesday morning (29 July) at the market…
I am rarely here on Wednesdays. This week is an exception because I am working here in mid-summmer. I usually go to the market in Yvetot on Saturday mornings. The locals always say hello to me. The people of this region are reserved and respectful but truely warm-hearted. I also inspect the prices from time to time. Having such a fascination for inflation, I like to make a few on-the-spot checks …(smiles).
You also have links to Le Havre, where you went to school…
My father had started his career at the Lycée François 1er in Le Havre, so I was able to complete my primary schooling there. At that time, I was one of two girls in a class of 35 boys! I then went to Raoul-Dufy, a girls’ school where my mother was teaching, and then to the Lycée Claude Monet.
Are you still in contact with people in Le Harve?
Yes, I have friends still living in Le Havre. Some of them never moved away while others left Le Havre and returned there for their retirement. It has become a different world. I adore this town with its extraordinary openness to the sea.
Do you like other places in Normandy, in former Lower Normandy? Manche, for example?
I like Deauville, Cabourg, Honfleur, all of those magnificant promenades – off-season – the D-Day landing beaches. But I’m not familiar with Saint-Lô, the Cotentin Peninsula or Mont-Saint-Michel. Parents now take their children to these places. But when I was young, there was neither the Normandy Bridge nor the Tancarville Bridge, which I saw being constructed. You had to take a ferry so we stayed on our own side. But I did visit Avranches several times for synchronised swimming competitions and a water polo tournment in the years from 1968 to 1974. We travelled there by coach. These are happy memories…