French Finance Minister Lagarde Defends Austerity

Says private investment is picking up, unemployment is down

On Sunday’s This Week with Christiane Amanpour on CNN, French finance minister, Christine Lagarde, defended the government's policy of austerity, saying that previous stimulus had set the French economy on the right track, and now austerity was necessary to reduce deficits. Amanpour had pointed out that “[t]here seems to be tension between the United States and Europe over . . . Europe . . . talking about a lot of austerity,” and asked Lagarde whether growth was at risk.

Amanpour asked how fiscal discipline could be made fair when “tens of millions of people out of work all over the world right now . . . seem to be having to pay for the excesses of the bankers, the billionaires, the speculators.” Lagarde cited two ways it could be fair: first, the sustainment and funding of “shock absorbers” such as unemployment benefits, welfare and other programs, and second, the imposition of a systemic tax on banks. Of the latter, Lagarde said, “that was decided in Sweden, in the U.K., in Germany and in France.”

Amanpour also questioned Lagarde about whether adequate safeguards had been put in place to guard against another “holy cow” moment—what Lagarde said she had said when she learned of the impending bankruptcy of Lehman Brothers. Lagarde responded, “We've been working really hard in the last two months to put in place what our leaders decided was needed: an alert control system, a supervisory system, discipline in the markets. But it's a constant job, because markets are very agile, and they reinvent new schemes, they invent new channels, new circuits. So we need to be careful for the whole public, not just for Wall Street, not just for the city, not just for the stock markets. We need to protect individuals.”

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