Below is the full transcript of an interview with European Central Bank President Christine Lagarde, which aired on “Face the Nation” on April 16, 2023.
MARGARET BRENNAN: We’re joined now by Christine Lagarde, former head of the IMF, now president of the European Central Bank. Good morning.
European Central Bank President Christine Lagarde: Good morning, Margaret. Nice to be back.
MARGARET BRENNAN: Good to have you here, and how is your recovery?
Madame Lagarde: Yes, in a few days, I think I will be fine.
Margaret Brennan: I’m glad to hear that. You have a long list of things ahead of you. And I want to ask you about global recovery. You were speaking a few days ago and you said that the economic recovery in this country is fragile and uncertain. The Fed thinks we will see a mild recession later this year. Did it predict you?
Madame Lagarde: First, there is recovery. This, I think, is a point that wasn’t really solid just six months ago where we all assumed there would be a recession, if only a technical one. If you look at all the forecasts at the moment, it’s all positive. It has been downgraded slightly. But overall, we have had a recovery and you know from different corners of the world, we are facing high uncertainty due to multiple factors. This is the war in Ukraine. It is that financial stability that has apparently been somewhat shaken by developments in the US and Switzerland. It is inflation that we are fighting. A recovery that we want to embed really creates a vacuum of uncertainty. That’s pretty much where we are.
MARGARET BRENNAN: So there were recent bank failures here in the United States, also one in Switzerland. It sounds like you’re saying you don’t see a hard landing, you see a positive path for the global economy?
Madame Lagarde: I think we have a narrow path to navigate, which requires both governments and central banks around the world to adopt the right policies.
Margaret Brennan: OPEC just cut output.
Madame Lagarde: Hmm?
Margaret Brennan: OPEC just cut output, but you don’t see that as a disruption?
Madame Lagarde: I know. And- and we have to be very focused. But in the meantime, if you look—I have to look at Europe right now. We have reduced our overall use of gas energy, for example, by more than 15 percent. So it’s not like we discussed here or there. We just reduced our energy consumption, number one. Number two, we’ve renegotiated with multiple partners, from Norway to the United States, which is a big supplier of our energy. And I think that our dependency, which we’ve learned the hard way, has been significantly reduced. So I think we’ve moved from the illusion of plenty of energy, free money, to building resilience and buffers. That’s what happened.
Margaret Brennan: It’s fun to hear that optimism. I mean, in the wake of the bank failures we’ve just seen, you’ve heard from bank CEOs in this country, the idea that they’re being more cautious about lending money, basically there’s been some contraction of credit. How anxious are you and how does it complicate your plans?
Madame Lagarde: It’s interesting that you should ask, complexity because it simplifies my plan and it complicates future growth.
Margaret Brennan: Because it slows down business activity so you don’t have to raise rates as much or as often.
Madame Lagarde: We don’t have to cut back. We will see. Because we really have to measure what’s going to come out of this — these financial events that have happened recently. What effect will it have? How will banks respond? How will they assess risk and how much will they lend? But if they don’t lend too much and if they manage their risk, that can reduce the amount of work we have to do to reduce inflation, right? But if they reduce debt too much, it will weigh heavily on growth. So a fine balance between credit risk, good management on the one hand and, on the other hand, financing the economy expected by the business community. The business community wants to invest right now. Some of them have large buffers and can use those buffers, while others need credit financing from the banking sector and the market, both.
MARGARET BRENNAN: I want to ask you about the United States. And it’s not a political question, it’s an economic question. But there are predictions that the United States could default on its national debt as soon as June, some say September, and we have a political deadlock in this country, with virtually no discussion of how to resolve it. Does it undermine your confidence in the United States? And what message does it convey to the world?
Madame Lagarde: I have great confidence in the United States. You know, since my years in this country and in this city since ’73, ’74, I’ve had faith in this country and I can’t believe that they would allow such a big, big disaster to happen because the United States defaulted. its debt. This is not possible. I can’t believe this is happening. But if that happens, it will have a very, very negative impact, not just for this country where confidence will be challenged, but for the whole world. Let’s face it, it’s the largest economy. It is a major driver of economic growth around the world. Can’t let that happen. I understand politics, I have done politics myself. But there comes a time when the higher interests of a nation must prevail. I’m sorry.
Margaret Brennan: And you think that will happen?
Madame Lagarde: I once again have great confidence in this country.
Margaret Brennan: You’re bringing a lot of optimism to a show where we don’t have a lot of optimism.
Madame Lagarde: Oh. I’m sorry (laughs)
Margaret Brennan: No, I like it. It’s funny. It’s a change. I want to ask you, though, what you just said in terms of US leadership. You look at the other side of the world and Xi Jinping says he wants China to be the world’s top power by 2049. And Beijing is very interconnected with many economies, especially in Europe. Is the United States losing global influence?
Madame Lagarde: There is obviously competition within these large economies. The United States is the world’s number one economy. China is clearly competing, and putting all its might into that competition. I think competition is healthy. It should stimulate innovation. It should stimulate productivity. But it is inevitable that these two large economies face each other. I very much hope that they can have a dialogue because, you know, all these relationships, whether it’s trade, whether it’s politics, whether it’s economic development, whether it’s financial stability, it’s a two-way street. We cannot ignore each other, and trade should not be conflictual. It must be careful. It has to identify areas that are strategic to one country or another – or all. But it shouldn’t be confrontational. I’m on the same page as Henry Kissinger or Australia’s new ambassador, Kevin Rudd. Conflict is not inevitable.
MARGARET BRENNAN: But it seems, in some of these political capitals, there’s increased political pressure to choose between the United States and China in different ways. Is it economically feasible?
Madame Lagarde: This will lead to an economic recession, the extent of which is uncertain. Is the world economy going to be affected by one or X percent? There are multiple predictions, all negative. So bi-polarization and bi-polarization of the world will lead to less economic growth, less prosperity in the world, more poverty all over the world. So I think this is something that should be avoided by all means.
MARGARET BRENNAN: Madam Lagarde, it’s always great to have you here. Thank you. We’ll be right back.