Thursday, 3 February 2011
France's Lagarde: Egypt Strife A Concern For Global Economy
PARIS (MNI) - The growing strife in Egypt and its potential impact on oil prices is "clearly a concern" for the global economy, France's Finance Minister Christine Lagarde said Thursday.
However, Lagarde said, "We must be wary" of pre-mature predictions on the economic impact, and she noted that there was a "good level" of oil reserves around the globe.
Lagarde appeared to call on Egypt's president Hosni Mubarak to cede to the protests and yield power in the name of stability.
"My dear hope as a person and member of the French government is that the situation will settle as quickly as possible and a transition will be organized in short order," she said.
She tied the spike in oil prices, exacerbated by the events in Egypt, to one of the priorities of France's G-20 presidency -- to tackle the volatility of commodities prices. Echoing recent comments by her boss, President Nicolas Sarkzoy, Lagarde argued that work on improving regulation of commodities trading lagged behind that for purely financial instruments.
France's Lagarde: Egypt Strife A Concern For Global Economy
PARIS (MNI) - The growing strife in Egypt and its potential impact on oil prices is "clearly a concern" for the global economy, France's Finance Minister Christine Lagarde said Thursday.
However, Lagarde said, "We must be wary" of pre-mature predictions on the economic impact, and she noted that there was a "good level" of oil reserves around the globe.
Lagarde appeared to call on Egypt's president Hosni Mubarak to cede to the protests and yield power in the name of stability.
"My dear hope as a person and member of the French government is that the situation will settle as quickly as possible and a transition will be organized in short order," she said.
She tied the spike in oil prices, exacerbated by the events in Egypt, to one of the priorities of France's G-20 presidency -- to tackle the volatility of commodities prices. Echoing recent comments by her boss, President Nicolas Sarkzoy, Lagarde argued that work on improving regulation of commodities trading lagged behind that for purely financial instruments.
She said there needs to be an "honest" debate on the role of speculation in the spike of raw materials prices, including food as well.
"Clearly the tension and the volatility that we see now, as we speak, on the price of oil is one of these symptoms of the lack of stability, lack of predictability, that is so much at the heart of our agenda concerning volatility of raw materials prices," she said.
The finance minister largely repeated France's already-known agenda for the G-20, which she said includes three principle areas: improvement and reform of the international monetary system; tackling the volatility of commodity prices; and strengthening world governance.
On the world monetary system, she noted that there exists "no forum where the leaders of the world's biggest currencies can meet" to discuss exchange rate issues.
She made clear she was referring to the fact that China, the largest holder of global foreign exchange reserves, needs to be more closely integrated into global financial institutions.
In this regard, she said that including the yuan in the basket of currencies that make up the IMF's special drawing rights (SDRs) was an "interesting" idea and she noted that many countries favored the idea. SDR's are a "useful tool in times of crisis," she said.
Lagarde acknowledged that work is ongoing among European finance ministers on a number of proposals to attack the sovereign debt crisis in Europe. Among those are measures aimed at fortifying the European Financial Stability Facility (EFSF).
"It's not necessarily a question of enlargement" of the EFSF, she said, but rather giving it "full effectiveness and flexibility," which can take "various forms."
Among plans under consideration, she said, was empowering the EFSF to buy government bonds -- but she did not elaborate.
Lagarde downplayed the widely reported notion that France and Germany are working behind the scenes on a grand plan that they will unveil at the EU summit on Friday, though she said the two countries are cooperating on the issue.
"France and Germany are reflecting and working on common plans. There are common propositions," she said. But they must first be discussed and debated by all EU governments before they are evoked publicly, she added.
In any event, the plans for attacking the debt crisis are "not the order of the day" at Friday's summit, Lagarde said. "May I remind you that the summit tomorrow is dedicated to energy," she said. "And it is a big enough problem."
Lagarde reiterated France's support for a global financial tax, but said the trick would be to find the right transactions to tax, which means the most transparent ones. She said such a tax had appeal, because it offered the opportunity of imposing a small rate on a very large base, which was the most efficient way to go. In that context, she said, foreign exchange transactions -- because of their volume and their transparency -- make a good candidate.
But for such a tax to win the day, it will require a "coalition of the willing" to find the right formula and to convince those who resist the idea. France, along with Germany and the UK, are supporters of such a tax.
