The Race for the Top Job at the IMF
This is a transcript of top stories presented by China's CCTV Business Channel as produced by CNBC Asia Pacific.
Hi, I'm Christine Tan and you're watching "Asia Market Daily".
The race for who will be the next IMF chief has officially kicked off - pitting emerging countries against developed ones.
Mexico put forth its central bank chief Agustin Carstens - while major European countries threw their weight behind French finance minister, Christine Lagarde.
While the decision ultimately lies with the IMF executive board, it's the role of acting chief John Lipsky to keep things running at the IMF till a new leader is found.
In a first on CNBC interview, Maria Bartiromo asked him how the scandal has affected the fund.
Lipsky: Well you can imagine the sense of shock and sadness over these circumstances. It's hard to believe. But at the same time this is an institution of incredible talent, dedicated professionals, who understand that the job of the fund is foremost and are dedicated to coming together and making sure the fund remains fully operational, and is fully able to deal with the important responsibilities they're facing."
Bartiromo: What are the institution's priorities right now, particularly as the debt struggles continue for Greece, Portugal and we continue to see speculation around Spain?
Lipsky: Of course and we remain very active in these areas. Maria, as you may remember last Monday, our board approved the latest two reviews of the Irish program and a new disbursement of funds. On Friday, the board approved the Portugal program that is along with our European partners, involves total costs of about $78 billion euros -- in support of a very thorough adjustment program in Portugal and right now, we have staff team in Greece reviewing with the Greek authorities their policy options.
Bartiromo: John, what's risk of default of Greece, Portugal, Ireland?
Lipsky: In each case, we have a program agreed and supported, agreed with these countries and supported with our European partners that does not contemplate debt restructuring. We -- of course, we entered into these programs with the conviction that with adequate policy adjustment in these countries and with the support of their partners, that they will be able to produce the kind of improvement, underline improvements in their competitiveness and economic performance that will lead to economic progress and avoid the need for any kind of debt restructuring.
Bartiromo: John, let me turn to Standard and Poors, cutting its outlook from Italy from stable to negative. Italy has the euro zone's biggest debt pile in absolute terms. What do investors need to know about Italy right now?
Lipsky: Well the Italian economy has been growing relatively slowly, however, in terms of their primary fiscal balance, they are in relatively in good shape, despite their very high debt load. So the — basically, there, Italy, excuse me is a high savings economy, relatively high savings economy. In other words, there are issues of concern that are being addressed by the Italian authorities, Standard & Poor's and like other rating agencies act on their own volition. But we are confident with good policies the European economy will prosper.
Bartiromo: What have we seen in the last month surrounding the euro zone?
Lipsky: Well let's take a look at the situation with regard to policies. Has there been a response to the self-evident problems? And the answer is in the three peripheral countries with the most difficult situations, there have been put in place a policy program supported by the innovative response of the European authorities who created the EFSF, the financial facility that allows them to provide funding to these euro area countries. In my sense there has been an active response, that is, as I said, has actually reduced the sense of a risk of contagion. Now it is going to take convincing, now implementing the programs that, making sure they are successful and then that, if over time, I think will quiet market concerns.
As we just heard, Christine Lagarde is the leading candidate, in the competition to become the new IMF Chief.
In a CNBC exclusive interview, Stephane Pedrazzi sat down with the French Finance Minister - and asked about her bid for the top job.
Lagarde: The position of France is very simple. It has been stated by the President very shortly, after the decision was made to have to replace the managing director of the IMF. And the statement of the President includes the magic word. Open, Transparent, Merit Based. That's the language that you find in the Pittsburgh communique in pretty much all G20 communiques and literature about the IMF. And France sticks to that. It's really going to be the value and the virtue of the process.
Pedrazzi: What about this unwritten agreement between Europe and the United States. On one side Europe would keep the leadership of the IMF and on the other hand the United States would keep the leadership of the World Bank?
Lagarde: The position of France. There are no one official and one official. Open and transparent and merit based.
Pedrazzi: Dominique Strass-Kahn changed the IMF deeply, don't you think that the crisis also changed the IMF?
Lagarde: Overall the financial crisis that we have faced ever since the end of 2008 has transformed the economy. Has transformed the financial sector, has called upon many international institutions to actually wake up, and be much more alert and agile in their way of operating. If you look at the IMF for instance. The fact that they have invented the flexible credit line, the precautionary credit line, and that they are really playing a key role in relation to the countries that have suffered from the crisis is only testimony to the major changes that have resulted from the crisis. The crisis has accelerated many processes. But it has certainly transformed some institutions, including the IMF.
Pedrazzi: You received recently some strong support from Germnay, the UK, even from your socialist opponents in France. Why suddenly people like you so much?
Lagarde: It's always very nice to be liked, and it's what Victor Hugo said once, he said : "I love being loved," but you know, we're not talking about that, we're talking about trying to find the appropriate solutions for the situation as it is.
Pedrazzi: But if the position was offered to you, what you take it?
Lagarde: I think, what an interesting question. A little premature.
Pedrazzi: You say open, transparent, and merit based. I think you have all the qualities.
Lagarde: It's for others to decide my dear!
That wraps up the latest "Asia Market Daily". I'm Christine Tan from CNBC, thanks for watching.
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