'We should explore any avenue that will help Ireland stand on its own feet'
Christine Lagarde in her office at the International Monetary Fund in Paris. photograph: eric bouvet
CHRISTINE LAGARDE INTERVIEW:The managing director of the International Monetary Fund is keen to understand Ireland and the Irish people and to see this country on the road to economic success
“We want Ireland to be a success,” exclaims Christine Lagarde five minutes into our interview in the International Monetary Fund’s Paris office in advance of her visit to Dublin today.
The remark pretty much sets the tone for the interview as she swats away, or neatly sidesteps, any suggestion that Ireland might not be the triumph that everyone hopes for.
It is mid-afternoon and the Arc de Triomphe – just about visible from Lagarde’s office – shines in the welcome spring sunshine. She has just come from Brussels and seems genuinely buoyed up by the outcome of the previous night’s meeting of euro zone finance ministers and that morning’s Ecofin assembly of the 27 member states’s finance ministers, chaired by Finance Minister Michael Noonan.
“Do you know what happened?” she asks in her distinctive tone, which mixes a certain French hauteur with the clipped accent of the English upper classes in a way that can best be described as Europosh.
“Yesterday there was a particular discussion relating to one instrument – the EFSF – and then it was to be further discussed this morning to include not only the EFSF, which is of euro group competence, but the EFSM, which includes the 27 member states.”
Ireland owes the two funds – the European Financial Stabilisation Mechanism and the European Financial Stability Facility – about €30 billion and restructuring these borrowings is seen as key to a successful exit from its EU-IMF programme at the end of the year.
The troika (the IMF plus the European Commission and European Central Bank) has been told to come up with a plan and the teams have already begun work, says Lagarde. If anything, she seems more optimistic about the outcome than Noonan, who has expressed some doubt as to whether Ireland will get the additional 15 years to repay the debt that it seeks.
“I would be cautious not to limit it to an extension. I think it has really been refined yesterday during the discussions as an adjustment that might include very much an extension of the maturities but is not limited only to the extension of maturities . . .”
She is more circumspect when it comes to what else might be on the table. There is not much more that could be done on the interest rates but “financial people can think of lots of things”, she says with a smile and presumably an ironic nod to the IMF’s ongoing mandate to lead reform of the financial services industry after the 2008 financial crisis.
Pushing out the repayments to the end of the term – a so-called bullet payment – is an option, she agrees, but there are many others.
“To the extent that it [a measure] is supportive of Ireland and that it will help smooth the transition into growth and Ireland standing on its own two feet, I think we should explore any avenue,” she clarifies.
Ensuring that Ireland can stand on its own two feet come next year is the main purpose of Lagarde’s visit. She describes it as “retuning her Irish antenna”, a sort of reality check on the numerous briefings and reports she receives.
She already has her own channel to Ireland. “Ever since I was a ‘baby’ lawyer in 1980, I have always had an assistant who was from Ireland; raised in Ireland and spoke Irish. The one that I worked with the longest was my assistant for 19 years, and that tells you something. I really like Irishwomen in particular.
“Sonia [Criseo] keeps sending extracts from the The Irish Times, from this, that and the other to indicate what is causing tension at the moment, what people are talking about and what is going on. She has eight brothers and sisters so she has good antennae out there,” Lagarde explains.
There is another dimension to her obvious empathy for Ireland. Lagarde worked for six years in Chicago where she rose to be the first chairwoman of the US law firm Baker McKenzie before being asked to join the French government of Dominique de Villepin in 2005.
“It was a midwestern American city and also very much an Irish one,” she says. So what is it that she likes about the Irish? She reflects momentarily before replying “their smile” and giving one of her own.
There should be plenty of smiling over the course of her visit to Dublin, which has a tinge of a victory lap about it for the IMF although no one, particularly Lagarde, wants to tempt fate.
“I want to understand where the country is – which from the reports I read is a good position – with a programme that is more than on track, with growth that has turned positive for the first time and exceptionally so in comparison to other European and euro area countries.
“I want to see how we, with the authorities, can best plan for finishing successfully the programme and to make sure that there will not be a relapse.
“That is what I am most concerned about,” says Lagarde before adding, “I would like to clearly underline and celebrate the efforts and what has been achieved . . .” The prospect of a relapse, not just in Ireland, is one of the IMF managing director’s greatest concerns at this point.
“Clearly the world economy avoided collapse last year and I am very concerned that, by moving into a semi-complacent mood, people risk a relapse.”
Risk of relapse
How real is the risk of a relapse in Ireland? “Our sense is that it is better to plan than to get caught afterwards with a need for support down the road.”
The Government is adopting “exactly the right approach” in terms of looking at options to smooth its return to the bond market. Both in terms of renegotiating the promissory note and the bailout loans, but also in negotiating a precautionary funding line that could be called down if needed, she says.
“All of that needs to be thought through as a comprehensive package to make sure that, when the programme is over, Ireland is solid and has the tools available. The principles of comprehensiveness and anticipation are two important ones from our perspective.
“The IMF can do all sorts of things in that respect and we will discuss them with the Government,” she says.
The case for such extensive international support – and the restructuring of the bailout debt in particular – is very much seen as a moral argument in Ireland, the Irish state having taken on an unbearable debt to make good the mostly European creditors of private banks.
But it’s clear that Lagarde’s liking for Ireland does not mean she necessarily accepts this argument. For her, the reason for giving Ireland further concessions is a pragmatic one.
“I think it [further concessions] is with a view to avoiding a bigger problem down the road.” She refuses to be drawn on whether fear of political instability along the lines seen elsewhere in Europe makes up part of this pragmatic argument.
The issue of whether the coalition might have fallen apart if the promissory note had not been renegotiated has thankfully been consigned to history. “That has been obtained now,” she says.
“Stability is the key, actually, to the implementation of a programme and the ownership of the programme, which is why coalition governments are both strong and weak. They are stronger because they embrace a larger base when they work and they are weaker in the sense that the leader has to make sure all members of the coalition are on board,” she offers by way of a general comment.
“All I can say is that political stability is an asset for a country to deliver under a programme and for a country to take its economy forward.”
The absence of serious social unrest also marks Ireland out from the other bailout countries. Does that surprise her?
“It is difficult to diagnose. I am not an Irish political animal. The little I know about Irish people is that they have a sense of realism and pragmatism, and an understanding of what needs to be done.
“Many of them have gone through the years of exuberance – if I may say so – up until 2007 and they know that there had to be a serious correction,” she says.
If anything, Lagarde foresees continued cohesion rather than greater unrest as long as there is continued broad political support and dialogue.
“There is a sense that everybody is engaged in the process. It is not something that is a burden for the middle class only.
“It is not the case that the upper middle class or upper class is not affected and the lower class completely left on their own.”