Interview with Madame Figaro
Interview with Christine Lagarde, President of the ECB, conducted by Morgane Miel on 13 July 2022 and published on 25 August 2022
25 August 2022
The past two years, which have also been the start of your term of office, have been challenging: on top of the public health crisis came the war in Ukraine and, in turn, the runaway inflation of recent months. What have they been like for you?
My feeling when I look back on these past few months is particularly one of always being on the lookout, always on alert. Yet when I took office in the autumn of 2019, my predecessor Mario Draghi had told me: “it will be relatively calm; we have restarted the asset purchase programme at a monthly pace of €20 billion and that should allow us to continue to fulfil our price stability objective”. Then in February 2020 at the G20 in Riyadh news began to reach us that towns and regions in northern Italy were being shut down in response to COVID-19. From then on, we were constantly in crisis response mode. The pandemic wasn’t strictly speaking in the ECB’s field but, out of necessity, we had to implement extremely swift and forceful monetary policy measures to enable economic activity to continue, even if in a half-slumber, and prevent the decimation of a whole swathe of the economy. Two years later, as the recovery was getting under way and we were seeing a stable outlook with a little breathing space, the war in Ukraine plunged us into crisis again.
Has it felt like you were losing control?
No, as there’s clearly some adrenaline flowing when you are in a crisis. In stormy conditions, all of your crew members are working to the best of their abilities and skills. The situation requires you to ignore petty rivalries and fears of stepping on each other’s toes. The crisis channels your energy and requires you to be able to motivate all your teams to work in the right direction. It encourages you to keep calm; this isn’t the time to raise abstract questions but rather to analyse the facts, try to tease out accurate information from the data available – which isn’t the easiest – and find the solutions.
Is there a particular moment that you remember?
Perhaps back in March 2020 when we devised the pandemic emergency purchase programme. Everything happened in the space of 48 hours. We were in a full lockdown and were working in conference calls, with the speakerphone but no screen. We had 25 decision-makers (the members of the Governing Council) on the line. One of my fellow Executive Board members lives in the same building as me and knocked at the door – he thought it was most likely going to be a late night so he had kindly stopped at the local bakery and brought some cakes with him. That evening we were both working at my kitchen table until the next morning. That’s how the programme started.
At what point did you think “it’s the right decision”?
I don’t necessarily think in those terms. There are 25 of us around the table – I’m not alone in making the decisions. What mattered most at the end of the night was the hope that we had done everything we could, that we had done our best.
You were Minister of the Economy and Finance in the midst of the sub-prime crisis when you were first interviewed for Madame Figaro. Then at short notice you replaced Dominique Strauss-Kahn at the International Monetary Fund, in circumstances we are all aware of. And with the pandemic, you have had to deal with a major recession. Have you ultimately found that you like the role of chief firefighter?
(Laughs) Moving from one crisis to the next makes you more resilient and better at reacting – at least I hope so. Something I’ve particularly noticed is that, by chance or out of necessity, women are often called on when there’s a crisis. As Eleanor Roosevelt said, “a woman is like a teabag; you can’t tell how strong she is until you put her in hot water”. There’s some truth in that.
Your decisions have a direct impact on the lives of Europeans, making their loans more expensive and potentially reducing growth. Yet we also need to prevent another recession. Do you feel the weight of that responsibility?
Yes, absolutely. I still buy my groceries at the supermarket, pay my own bills, including my gas bills, and meet people at the market, as life here at the ECB can be a little removed, disconnected and punctuated with econometric models and projections. I move forwards with a sense of duty and humility. I’m not concerned about the outcome – I know we will return to an inflation rate close to 2%, but when? Over what time period? And what will the impact be? We can no longer rely exclusively on the projections provided by our models – they have repeatedly had to be revised upwards over these past two years. There are things that the models don’t capture. Sometimes the unexpected happens. So we have to pay attention to traditional indicators while also monitoring empirical data and what we expect to happen in terms of geopolitics, energy price developments and demographics.
That requires you to develop your own view…
Yes, that’s where the “element of judgement” comes in. I think I said that monetary policy was both a science and an art. We’re not machines or robots. Of course, we use the tools available to us, the aggregate data and the indicators that our models produce – but that isn’t enough.
How do you inform your analysis?
I’ve always tried to listen more than hear. So I listen and read a great deal, including in fields that I’m less familiar with as, unfortunately, the complexity of the world also lies in the fact that everyone is increasingly focused on their own field of expertise. I’m a firm believer in the virtue of diversity – not only gender diversity but also diversity of thought and skills – to understand that complexity.
Where do you find that diversity?
In art and culture – they are one of the strengths that unify us in Europe. I’m also supported by my children and grandchildren, who open up their world to me. One of my sons has a keen interest in space architecture – he’s now sending me lots of messages about telescopes so I read and look at things about that. And when my other son, who has two restaurants in Paris, tells me about his problems relating to operating statements or HR management, I’m also listening and learning. Other than that, I’m rereading both James Joyce’s Ulysses, which was given to me by the Irish Eurogroup President Paschal Donohoe, and Homer’s Odyssey, as well as a few books on economics but, if truth be told, they aren’t quite as good a read.
How can we rebuild the world of tomorrow and create a sense of hope?
I think we are at a watershed moment triggered by the war in Ukraine. The horrific violence inflicted on the families on the ground has considerably raised awareness and has led us to review a number of priorities − especially as regards the fight against climate change, the need to speed up the transition to non-fossil and renewable energy sources. The war has also made us reflect on our relationship with others: the days of believing that we will forever be in a privileged and protected zone of peace are over. In economic terms, this means we must ask ourselves who we do business with and on what terms. Should we focus on exclusive sources of supply or diversify? I’m not in favour of deglobalisation, but rather of a neo-globalisation based on principles other than being ever cheaper and ever faster. I am convinced that the rationale of being ever more secure and ever nearer will prevail. And in this setting, Europe has a very strong position indeed.
Because the COVID-19 crisis simultaneously revealed and highlighted the malfunctioning of globalisation…
Absolutely. If I now ran a small, medium-sized or large business which received components from all over the world, and if I saw that transport costs were soaring, or that the security of the sources of supply depended on the lockdown rules applied by one government or another, I think that I would look very closely at my supply chain. Independence is achieved by diversifying sources of supply, and by seeking security through proximity.
How can we encourage the economy to become greener? How much room for manoeuvre do you have?
The general view here used to be that this topic falls outside the domain of central banks. When I was appointed to my position close on three years ago, I came with the conviction that I would of course do all my work on monetary policy, but that you could also count on me to address the topics of climate change and women’s issues. In fact, I made this clear during my confirmatory hearing at the European Parliament – and my appointment was approved, so doesn’t that give me the right to do what I said? Thanks to the intelligence and goodwill of the members of the ECB’s Executive Board and the governors, and after a good deal of persuasion, we have integrated the necessary struggle against climate change into the foundations of our strategy.
What do you mean by that?
We have an action plan with objectives, timelines and teams responsible for its implementation and we are making progress. In early July we presented some modifications to the way in which climate considerations are integrated into the econometric models that we use for monetary policy, as climate change is having a clear impact, especially on inflation. If more and more climate disasters, droughts and famines occur throughout the world, there will be repercussions on prices, on insurance premiums and on the financial sector. We need to take that into account.
You have also committed to greening our asset portfolio. What does that mean in practice?
It means that, in future, when we lend money to future debtors, we will require them to pledge more collateral for brown assets than for green assets if the former constitute a greater risk.
That implies that there are proven and comprehensive assessment criteria…
That’s true. We have assessment and rating systems which are developed internally and which we compare with existing ones. This should also encourage rating agencies to further incorporate these criteria. The problem is that there are scores of them and they vary across countries. Some are organised by line of business, others by geography. I can imagine that these environmental, social and governance standards will be harmonised and tightened rather quickly.
Will that be enough to avoid greenwashing?
The ECB’s supervisory arm will intervene there: we are already carrying out stress tests but we will subsequently need to get down to serious business. The good will and determination of the US Securities and Exchange Commission and of Emmanuel Faber at the head of the International Sustainability Standards Board for harmonising the “green standards” will allow us to clean things up a bit in respect of greenwashing. We will move towards stamping it out.
In many countries of the world, we see society splitting in two. You have repeatedly said that you find this concerning, especially from a political perspective. What can you do about that in your position?
What I can do best in my position is to lower inflation to restore price stability, and set a horizon. After that, it’s up to governments to do plenty of other necessary things. In an increasingly digitalised world, it’s essential that men and women can acquire sufficient knowledge, skills, and proficiency in using IT tools. This is obviously far more difficult for people who grow up in low-income single-parent families with limited access to technology. We need to bridge this gap through schooling; this is a massive task that, in my view, needs to be tackled.
It’s in all the headlines: people will be paying close attention to what you do in the coming next few months. What helps you cope with the pressure?
My family is a great support and always has been. And there’s a motto that I took from my time on the French national team for synchronised swimming: “Grit your teeth and smile”. That always works. And I believe my faith in people is unshakeable, as is simply my Faith. I’ve said before that love, and the confidence we draw from it, is what saves us. This may sound sentimental, yet it’s actually anything but: showering as much love and affection as we can on those who are having a hard time is what counts most.
By all accounts, at the helm of an organisation as complex as the ECB, your style of leadership is your main asset. How would you define it?
I try to be inclusive, to bring all potential contributors around the table. That’s how I do things. I come from an environment in which, as the head of a large international law firm (Baker McKenzie, ed.), you have to take this approach, because in a world of associates you don’t have any hierarchical authority. Everyone has to take ownership of their projects. And I think that is the best way to manage groups and get things done. I also think I’m someone who tells the truth, even to leaders. When I attended a G20 meeting as Managing Director of the International Monetary Fund, I was generally asked to speak at the beginning as I didn’t mince my words: I tell it like it is and I don’t try to embellish it.
On your bookshelf you have displayed the Ruth Bader Ginsburg Medal of Honor that was awarded to you. How did you react to the ruling by the Supreme Court of the United States to end the federal right to abortion?
I see it as a catastrophic legally argued decision for society in general and women in particular. Defending women’s rights is a daily struggle and you need to always stay on the alert and be on your guard. I will never forget Simone Veil who, when defending her bill in 1974, apologised, in a manner of speaking, for being a woman in an assembly of men. We can’t allow fundamental decisions to be taken by a large male majority; that is simply not on.
What would you like to say to our readers?
Help each other.
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