Interview with Christine Lagarde, President of the ECB, conducted by Geneviève Van Lède on 5 July 2023

How would you rank the Rencontres économiques d`Aix-en-Provence on the international stage − as the Provence version of Davos?

I would describe it as an important meeting place for stimulating discussions on economic issues, similar to the forum on central banking hosted by the European Central Bank in Sintra, Portugal, every year for the last ten years, or its US equivalent in Jackson Hole. You mentioned Davos, but I think Davos is less exclusively focused on economic topics, which is hardly surprising given that this event in Aix-en-Provence is organised by the Cercle des économistes think tank.

What impact do the Rencontres have on the region?

You spoke of Davos to refer to the World Economic Forum. While the name of the Forum is well-known, it’s perhaps more often referred to by the name of the Swiss resort Davos. Locations are significant, just as Aix-en-Provence is for the Rencontres. I also think there’s a lasting bond between Aix-en-Provence and the Rencontres, offering an opportunity for the city and the region, as no-one can question the benefits it will bring to both, as indeed also to the Cercle des économistes, which has such a historic and inspiring setting for its proceedings. But I can imagine that it also presents quite a challenge as you have to live up to the success of the previous event every year anew.

You will be speaking this evening about the role of women. What are you going to tell the audience?

First and foremost that my priority is to maintain price stability. But that does not stop me from defending a cause that has been close to my heart for more than 40 years now. A cause which is in fact intricately linked to the economy – considering that it’s often women who decide on household purchases, even the biggest ones. On this all-woman panel, moderated by Emmanuelle Auriol, and including Laurence Boone and Louise Mushikiwabo, I will focus on the economic aspects, on women’s contribution to the economy. And why we should deplore the lack of progress on these issues and come up with solutions to remedy the situation.

How would you describe their contribution?

We can describe it in three ways. First, it lags behind when compared with the contribution made by men. Second, it is ignored. “Housework”, which is by and large done by women, is not factored into measures of wealth production, such as gross domestic product. Lastly, it is poorly paid. This is not just because women are still paid less than men [for doing the same job]. It is also because of the housework issue I just mentioned, and also because many women worldwide perform undeclared work.

How can we change this?

First, many countries have passed laws to fight discrimination and prevent gender pay gaps, but they are not being applied enough. Second, we need to develop the infrastructure or programmes that enable parents – not just women – to look after their children. France does comparatively well on this front. Third, we need to fundamentally change our ways. We need to stop thinking that only women can take care of having their children vaccinated or of making sure they do their homework. To take just one example [of such changes], society and employers should also encourage paternity leave.

Is inflation under control at last?

It has started to decline, falling from double-digits at the start of the autumn of 2022 to half that today, at 5.5% for the euro area as a whole in June. French figures are slightly weaker. This is due in particular to the fall in commodity and energy prices, and I think also to the initial impact of our monetary policy decisions on prices. Food prices are also rising at a slower pace. But inflation is still higher than our medium-term target of 2% and according to our staff projections, is set to remain so in 2024 and 2025. We therefore still have work to do to bring it back down and reach our target.

What about economic growth?

Growth has been flat in the last two quarters, with very slightly negative growth in the fourth quarter of 2022 (-0.1%) and zero growth in the first quarter of 2023. We estimate euro area growth to be around 0.9% in 2023, with the figure for France being very slightly lower, but we should see a return to potential growth over the period 2024-25.

Can firms increase wages as called for by their employees?

The recent period of high inflation was not accompanied by a reduction in firms’ profit margins, which even increased in some cases – particularly when demand for goods and services outstripped supply. At the same time, wages have also risen by more than expected. In the current context, it is important to know whether firms are going to reduce their margins a little to meet their employees’ expectations of higher wages and to restore some of their purchasing power, which is what has normally happened during previous high inflation episodes, or whether we are going to see a twofold increase – in margins and in wages. A simultaneous increase in both would fuel inflation risks, and we would not stand idly by in the face of such risks.

How can France reduce its debt?

All euro area countries saw their debt increase during the pandemic. Now that the health crisis is behind us and energy prices have fallen, a number of support programmes need to be withdrawn, such as the French energy tariff shield, and public finances need to be put on a path that will make it possible to reduce debt at a steady pace. And that is something that all countries can do.

Compliments of the European Central Bank.