Christine Lagarde (Paris, 1956) presides since November the European Central Bank (ECB), key for the most indebted countries such as Spain and Italy to continue financing themselves. This is his first interview for a Spanish newspaper and was given with Corriere (also from the RCS group), Les Echos and Handelsblatt.

Emmanuel Macron and Angela Merkel propose a European recovery fund of 500,000 million euros. Do you think this is enough so that the ECB does not have to make the effort alone? The proposals of the Franco-German initiative are ambitious, concrete and welcome. They pave the way for a long-term debt issue from the European Commission and, above all, allow the allocation of significant direct budget aid to the States most affected by the crisis. This demonstrates the spirit of solidarity and responsibility mentioned by the chancellor last week. There can be no strengthening of financial solidarity without greater coordination of decisions at the European level. European countries are gradually emerging from the containment phase. What is the economic impact in the euro zone? We are facing a considerable and unknown 'shock' in peacetime. We must face it with determination to help our economies recover as quickly as possible and avoid a social crisis. Our scenarios consider a recession of between 5 and 12% for the euro area this year, with a central scenario of 8%. We will review our projections on June 4, but in the worst case scenario, we anticipate a 15% drop in gross domestic product in the second quarter alone. In reality, it is difficult to assess the effect of unconfunding in each country, especially if we have to include the hypothesis of a second wave of the epidemic in the fall. There is one factor that seems likely: if there is a second wave, its economic impact should be less serious, since the experience is bearing fruit. In this crisis, what is the role of the ECB? According to the Treaties, it does not include growth and employment in its mandate ... Price stability is at the center of our mandate, with inflation lower than, but close to, 2%. In circumstances such as today, when inflation - and inflation expectations - are well below our target and the economy is in a deep recession, the ECB must apply as accommodative a monetary policy as is necessary to stabilize both inflation and economy. We must intervene whenever there is a risk of tightening financial conditions. And we must ensure that monetary policy is transmitted to all countries in the euro area, in all sectors. This is the purpose of our extraordinary instrument, the Pandemic Emergency Procurement Program (PEPP). Do all countries in which monetary policy does not seem to be producing the desired effects deserve help? Of course they deserve it. The transmission of monetary policy is as important as the monetary policy itself. The 2012 financial crisis and then the 2015 debt crisis in Greece threatened the future of the euro itself. Today's economic crisis is much stronger. Is there a risk that the eurozone will break? The situation is not the same at all. This time it is not a financial and real estate crisis that has spread to the entire economy, nor a crisis in which a country has stood apart from the rest by applying bad economic policy. It is a symmetrical blow, which affects all economies at the same time. To protect the health of Europeans, policy makers have decided to partially close their economies. Therefore, it is important that all countries restart in good condition using all available instruments. Is the risk of breaking the euro therefore zero? Yes, and I remember that the euro is irreversible, it is enshrined in the Treaties. The interest rate differentials for the debts of southern European countries are greater than early March, despite the steps you have taken: are you satisfied? I insist: it is our role to ensure the correct transmission of monetary policy in all the countries of the euro area. We will continue to act without batting an eye. Since the ECB announced PEPP on March 18, the Italian spread (against the 10-year rate of the German Bund) has decreased considerably. The risk premium of Spain and Portugal has also decreased. How do you assess the reaction of policy makers to the crisis? In 2012, its predecessor's "whatever it takes" came after, and not before, European governments made commitments ... At the national level, governments have taken steps to meet the challenge. Among direct aid to households, moratoriums and guarantees to the private sector, they have put on the table the equivalent of 20 points of GDP in the euro area. That's a lot. For its part, the European Commission has removed the limitations of the Stability and Growth Pact and unlocked state aid mechanisms: this was essential. But there is a limit to all this: the effort has been too asymmetric. Depending on the country, it varies between 2% and 40% of GDP, if we add direct aid and guarantees. Economically weaker countries, which in some cases are the most affected by the virus, do not have the budgetary leeway to make the effort necessary to get their economies back on their feet. Therefore, the solution is a rapid and robust European fiscal stimulus plan to restore symmetry between countries as they emerge from the crisis. Clearly, this plan should provide more aid to countries that need it most. Providing this collective aid is in the interest of all Member States. What do you expect from the European Council? The Council has an immense responsibility and must live up to the seriousness of economic damage and social suffering. What has been done so far? 540,000 million euros are already potentially available, among which comes from the European Stability Mechanism (ESM): additional guarantees to companies (focused on SMEs) promised by the European Investment Bank; and the European Commission's SURE plan to co-finance part-time work, which should be launched from June. The ESM lines of credit are not like the rescue programs of the past. They are loan offers equivalent to up to 2% of the GDP of each State, at very low rates and with minimum conditions. It is sufficient for the applicant to demonstrate that the funds are used for direct and indirect health expenses to combat the pandemic. This package of support measures is welcome, but it is clearly insufficient to revive the economy of the euro zone. How much should it amount to? We estimate that the total additional financing needs of the States, generated by this crisis, only to in 2020, it is between 1 and 1.5 billion euros. Some will easily achieve the necessary amounts, while others will need community financial solidarity. Its size and composition will depend on the ambition of the Heads of State or Government, guided by Charles Michel and Ursula von der Leyen. This European recovery plan, which I hope will be rapid and massive, will also have to focus on investing in public goods of common interest, those that are better financed together than alone, because that is more effective. I include here health security, the transition to a greener, more digital economy and more protective of biodiversity If the European Council does not create a sufficient recovery fund, can the most vulnerable countries still have the ECB bailout program (UNWTO ) and under what conditions? The UNWTO program is still an important instrument in the European toolbox, but it was designed for the 2011-2012 crisis, which is very different from this one. I do not think it is the most appropriate instrument to face the economic consequences of the health crisis created by Covid-19. Today and in the face of such a systemic shock, it is the PEPP, our program for the purchase of public and private securities of 750,000 million euros, the most appropriate. Its amount was calculated in March, when we had a still imprecise idea of ​​the recession. If your forecasts change in June, will this be the time to revise it upwards? On this subject, we have been and are very clear: we will not hesitate to adjust the size, duration and composition of the PEPP as much as necessary. We will use all the necessary flexibility within our mandate. We have no psychological obstacle. The budgetary situation in Italy, Spain and France was difficult even before the crisis. Doesn't your current situation make you shiver? Should the Stability and Growth Pact be abandoned? The priority today is to help economies recover. States spend and debts rise accordingly, and the debt-to-GDP ratio will rise because we are in recession. All the countries of the world are seeing their debt levels increase: according to IMF forecasts, the debt of the United States will reach more than 130% of GDP by the end of 2020, while the euro area will be below 100%. I am talking about an average, of course, because there are differences between the countries of the euro area. But to assess debt sustainability, we should not focus on the level of debt relative to GDP. The level of growth and current interest rates must be taken into account. These two factors are decisive. I believe that this crisis is a good opportunity to modernize the modalities of the Stability and Growth Pact, which is now suspended. Innovative proposals have been made in the past, including by the IMF, which should be re-examined. Its relevance and effectiveness must be measured. I think that the terms of the Stability and Growth Pact will have to be reviewed and simplified before we can think about restoring it, once we have emerged from this crisis. What do you think of the idea of ​​coronabonds as a way to mutualise debt? The important thing is Let all European countries realize how interdependent they are: A German car manufacturing chain can stop because there are no Italian, Spanish or French spare parts. Trade integration within the euro area is so strong today that it is obvious that all countries, especially the stronger ones, are interested in the weaker ones recovering. Otherwise, everyone loses.If the European recovery plan combines Community grants and very long-term loans, with low interest rates, aimed mainly at the countries that need them most, we will have taken a great step forward in European financial solidarity. What do you consider very long-term loans? 10, 30, 50 years? In the case of the European Recovery Fund, the maturity of the loans should be at least 10 years, but it is clear that longer terms would help spread the costs of the crisis over time. The ECB, for its part, is buying securities with very long maturities, up to 30 years. What is really at stake in the decision of the Karlsruhe Constitutional Court? His independence, the primacy of European law or Germany's attitude towards the EU or the euro itself? We have taken good note of this decision. The ECB is subject to European law, is accountable to the members of the European Parliament, and ultimately responds to the Court of Justice of the European Union. In December 2018, the ECJ ruled without a doubt that purchases of government securities by the ECB (PSPP program) fully comply with its mandate and European legislation. But isn't this a serious challenge to the European legal order? Europe was built on the basis of the rule of law ... Europe is an architecture of law; the European Union is built on a very clear legal order. And the independence of the ECB, guaranteed by the Treaties, is a pillar of German monetary thought. This is what gives the ECB the strength to fulfill its mandate. Can you, despite this decision, continue to use your debt buy-back programs? Yes, the ruling of the German Constitutional Court itself is explicit: it says that the PEPP program decided in the context of the pandemic is not affected by this ruling . I am not afraid of either the pandemic program (PEPP) or the previous program, which refers to debt purchases from 2015 (PSPP). I am already saying that the Court of Justice of the European Communities ruled that it was in compliance with the Treaties in December 2018. We stand firm in pursuit of our objective of price stability. Are you not afraid that doubts will arise in the financial markets and that this will limit the effectiveness of your policy? PEPP is a selective and time-limited purchasing program and responds to exceptional circumstances. The other European institutions have also taken exceptional measures in this crisis. Is the legitimacy of the PEPP assured by the exceptional nature of the moment? It is absolutely justified by this exceptional shock. But how is the Bundesbank going to position itself and participate - or not - in the programs of the ECB under these conditions? Under the Treaty, all national central banks must be fully involved in the decisions and the implementation of monetary policy in the euro area. Does the Bundesbank have freedom of judgment? Each national central bank in the euro area is independent and cannot accept instructions from governments. This is established in the Treaties. But what is the role of the ECB in this conflict? My conviction is clear. The ECB received a mandate from the EU Member States when they drafted and ratified the Treaty. The ECB is subject to the jurisdiction of the Court of Justice of the European Union. We will continue to be accountable to the European Parliament and explain our decisions to European citizens. In the coming years, how can the most indebted countries get rid of the debts contracted by the virus? Will they be canceled, lengthened, reduced? The solution is to generate solid and sustainable growth that, over time, will amortize the debt burden and allow our economies to develop harmoniously to satisfy the aspirations of our citizens. Among some economists, the idea of ​​perpetual debt He has had some intellectual success. It is, indeed, a debate ... intellectual He was in Washington at the head of the IMF, he returned to Europe a few months ago, what surprises him? I returned to Europe with the same convictions: our growth models must profoundly evolve to anticipate and curb climate change; inequality is a danger; globalization must be more respectful of the human being. From this point of view, Europe has fundamental and precious values ​​that inspire the rest of the world and that we must defend.

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