French Finance Minister explains fiscal discipline, markets to Christiane Amanpour

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Christiane Amanpour interviewed French Finance Minister Christine Lagarde Sunday on ABC’s “This Week.” Amanpour accused Europe’s austerity measures of endangering the world’s economic recovery, but Lagarde ticked off her country’s improving numbers in unemployment, growth, and deficit.

“Why would I inject more public money into the system when private investment is picking up,” she asked Amanpour.

Lagarde was also explicit about the need to raise the retirement age in France to save the country’s finances, dismissing the threat of protests by saying, “it’s only two years, and people have gained 15 years of longevity.”

Transcript of the exchange below:

AMANPOUR:There seems to be tension between the United States and Europe over what’s the most sensible way to deal with the current lack of growth. The U.S. wants Europe to continue pushing money into the system; Europe is talking about a lot of austerity.

LAGARDE: In terms of growth versus austerity, it’s a policy that we’ve adopted in pretty much all European countries. But we need to address both issues. If we do not reduce the public deficit, it’s not going to be conducive to growth. Why is that? Because people worry about public deficit. If they worry about it, they begin to save. If they save too much, they don’t consume. If they don’t consume, unemployment goes up and production goes down. So we need to attack that circle from the deficits.

AMANPOUR: But you took — you called it a circle, and there is a circular argument about it, because, in fact, many economists, particularly American economists, are saying that Europe is… LAGARDE: Some of them. AMANPOUR: Many of the prominent ones are saying that Europe is, in fact, going around it the wrong way, that, in fact, it needs more stimulus to provide more growth and then to attack deficits from a period — from the position of strength. Why won’t Europe do that?

LAGARDE: Because if I look at my numbers, which is better than, you know, theories and — and — and speculations, if I look at my numbers, we’ve stimulated the French economy massively in the year 2009, end of 2008, 2009. And my numbers are now going up. I’ve got growth up 1.6 percent from negative 2.6 percent. I’ve got unemployment down from 9.6 percent down to 9.3 percent. And I’ve got deficits down, as well, from 8.2 percent, where we thought it would be down to 7.7 percent. So the numbers are good. Unemployment is going down. Why would I inject more public money into the system when private investment is picking up?