World Economy

IMF's Lagarde: Far-right win in France would cause 'major disorder'

Key Points
  • MF Managing Director Christine Lagarde says French election could undermine EU stability
  • Lagarde also says global growth is improving with the help of the US economy
Lagarde: US improvement helping drive global growth
Lagarde: US improvement helping drive global growth

A strong showing by far-right candidate Marine Le Pen in Sunday's French presidential election would cause major problems, the head of the International Monetary Fund said Thursday.

"It would certainly unveil major disorder and the risk of dislocation," IMF Managing Director Christine Lagarde told CNBC during an interview at this week's meeting of the foundation and the World Bank in Washington.

Lagarde was speaking of the possibility of the National Front leader winning enough votes to qualify for a May 7 runoff by the top two vote-getters on Sunday.

Though Le Pen's standing in the polls has been fading recently, the prospect of a victory by the right, and the accompanying sentiment to get France out of the European Union, is one that Lagarde does not find encouraging.

"First of all, I think the (EU) project itself has protected us from the horrors of war, and we need to keep that in mind even for the younger generations which have not known any of that," she said. "But we were at our throats for centuries."

"The fact that we have had nearly 70 years of peace and amicable and constructive relationships is a jewel, and it needs to be secured," she added.

Lagarde did not predict which way the election would go, but did say she will be voting.

On other issues, her outlook is considerably sunnier.

Christine Lagarde
Getty Images

Regarding the economy, the IMF recently has upgraded its outlook for global growth. Though the U.S. likely grew at a sub-1 percent level in the first quarter, the foundation sees domestic GDP rising about 2.2 percent this year, a considerable improvement of the 1.6 percent post-recession gains.

Lagarde gave a tentative vote of confidence to tax reform in the U.S., which she said can benefit both the domestic and global economy if it is tailored the proper way.

President Donald Trump and Congress are working on measures that reduce both corporate and individual tax rates, though the future is uncertain. Lawmakers are in disagreement over one proposal that would exclude exports but hit imports harder.

"If there is a good tax reform, particularly corporate tax reform, that would certainly help," Lagarde told CNBC. "Some of the suggestions currently floated are headed into the right direction, from our point of view."

However, she issued some caution over how the proposals are formulated.

"We believe that any tax reform would have to be mindful of the spillover effects," she said. "What impact does it have on other countries? Because clearly while it has to be good for the U.S. economy, it should also be helpful for the rest of the world, because all economies are interlinked."