The following are comments by French Economy Minister Christine Lagarde speaking in an exclusive interview with Reuters Insider on Thursday.


I believe markets and investors in particular are uncertain and have doubts or questions about European banks and that has been a wave in the last 4-6 weeks.

The sooner European banks can on a coordinated basis ... publish results -- and I'm talking results of stress tests -- the better.

I know heads of states are likely to talk about it today and I for myself am strongly in support of that publication.

If someone suspects you have an illness, it's all very well to say no, no, no I'm very healthy, but it's even better if you say ok, fine, take my blood and make sure that I'm healthy.

There is nothing more damaging than rumours, suspicion, doubts and uncertainty. What's best for markets, operators and investors, is the reality of numbers, figures, percentages as long as they are accurate and honest.

As far as my banks are concerned there is willingness to publish and no trepidation or anxiety.

I can't say for certain (when French banks will publish), my hope is next few weeks and certainly end of July would be idea.

The (French) tests are not yet complete and we will stress the system a little more to make the results more credible (but the conclusion that we can draw) is that the ratios hold well for all the system.

If by chance it was not the case, there is a requirement for recapitalisation, reconstitution of equity.


I clearly understand that there is a huge gap and discrepancy between European time and market time.

Because there is slowness, there is uncertainty


We incorporated the entity with a view to closing it down in three years when it is no longer needed.

To go the first step in April with Greece with 110 billion euros, that was the first dent in the treaty.

This is a huge change but one demanded by the circumstances because we want the euro to remain (strong).


It's always been my view that the IMF would be a useful facility.

It had never been done in the euro zone.

It was disputed, some countries did not want the IMF involved.

We are financing the IMF so we are getting a little of our money back in a way.


The natural economic government of Europe is at the level of 27.

In case of necessity, they (euro zone countries) should meet and give guidance.


That commitment we will honour.

We don't want to operate under the fanatic pressure of analysts.

Yesterday in France was one of the steps on that way.

A lot of observers would have said a few weeks ago 'they won't do anything serious.'

We have announced a (pensions) reform with a view to closing the gap between the private sector and the public sector.

If you look at the whole of the reform, it is a significant step and will contribute as of 2013 to reducing the deficit by 0.5 percent.

We have broken the myth of retirement at 60 ... it was fine in their old days, but irrelevant today given pressure on public finances.


They are ambitious, some would say audacious, but we aren't going to revise those numbers before August, but frankly they are not unrealistic.


I don't think you've heard me mention the word austerity.

We have that growth that is picking up a bit. And the same time we need to be much more sensible about public deficits.

It's like having a car and having to work on two pedals at the same time.

We need to tip-toe out of our stimulus packages.


Clearly we need to question where growth is going to come from.

The Europe 2020 that is being discussed at the moment.. My question is whether that will be sufficient to deliver improvements in our productivity.


I don't have any special appreciation or dislike or satisfaction.

I'm not commenting on that, I take it as it is.


It has not stopped being extremely independent.

We had no idea what measures the ECB was going to announce (before meeting on May 9)

(ECB) President Trichet has been very clear that it is temporary.


You cannot expect a huge, massive change at once.

Let us agree (first) that we have a economic governance at the right level.

Once we've progressed along that path, then let's explore what the (ECB) objectives are.


Financial sanctions that you apply to a state that is not doing well and (then) you apply an additional financial sanction ... there is something that is not actually correct in that regard.

Let's make sure we have appropriate sanctions ... I recognise it could bite back.

If I was minister of finance and went home without voting rights, I'd be very embarrassed and ashamed.


Don't forget that this economic government is something that was much resisted in the past.

As ministers of economy and finance, we look at numbers in isolation...but we do not have the entire equation.

So the actual commitment and the political drive in the widest sense, including all parameters of the decision process, is really at the level of heads of state and government.


That gap (in decision making) was based on the time it takes to create those historical facilities, as we just did in May, and also because of the fact of that uncertainty that looms over European banks, which I certainly hope will be alleviated by the publication of stress test results.

We also need to demonstrate to colleagues and partners and observers and analysts that not only do we have a better debt figure than, say, the United states and Japan -- by a long way as far as Japan is concerned -- not only do we have a deficit that is on average in the euro zone, lower than in the United States for instance, if you take all numbers and not just federal numbers...

Delivering against commitment will be key -- the fact, for instance, that France yesterday announced a bold, strong and ambitious reform on retirement, the fact many European members are delivering against the expectations that they restore public finance, and France will do so. They are each and every time proof of the pudding.

The show will be available on demand on 3000 Xtra. Click on:

(Reporting by Gus Trompiz and John Irish)