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IMF

IMF’s Lagarde spends second day in court

IMF chief Christine Lagarde is spending a second day being questioned by French prosecutors on Friday as part of a probe into a €400 million state payout to disgrace businessman Bernard Tapie. If Lagarde is charged she could be forced to quit the IMF.

IMF's Lagarde spends second day in court
IMF chief Christine Lagarde arrives at court in France for questioning by prosecutors. Photo: Lionel Bonaventure/AFP

French prosecutors will grill IMF chief Christine Lagarde for a second day after being heard all day by prosecutors who are due to decide whether she should be charged over a state payout to a disgraced tycoon during her time as finance minister.

"See you tomorrow," she told reporters after a long session at the Court of Justice of the Republic.

Criminal charges against Lagarde, 57, would mark the second straight scandal for an IMF chief, after her predecessor Dominique Strauss-Kahn, also from France, resigned in disgrace over an alleged assault on a New York hotel maid.

Despite Lagarde facing the possibility of charges the International Monetary Fund expressed "confidence" in its chief, Lagarde, on Thursday as she appeared in a French court to answer questions about her role in a 2007 payout scandal.

"The executive board has been briefed on that matter, including recently, and continues to express its confidence in the managing director's ability to effectively carry out her duties," IMF spokesman Gerry Rice said.

Lagarde has also received backing from the French government. Finance Minister Pierre Moscovici told AFP that Lagarde "retains the full confidence of French authorities and myself".

But government spokeswoman Najat Vallaud-Belkacem said she thought Lagarde's days at the IMF were over if she were charged.

Her court appearance comes after Lagarde, the first woman to run an organisation considered the pillar of the international financial system, was named the world's seventh most powerful woman by Forbes magazine.

Known for both her intellectual prowess and elegance, Lagarde smiled as she arrived at the courthouse in an upscale Paris neighbourhood, greeting the several dozen reporters outside with "It's a pleasure to see you again" before entering the building.

The Court of Justice of the Republic (CJR), which probes cases of ministerial misconduct, is seeking an explanation of her 2007 handling of a row that resulted in €400 million being paid to Bernard Tapie.

The former politician and controversial business figure went to prison for match-fixing during his time as president of French football club Olympique de Marseille.

Prosecutors working for the CJR suspect he received favourable treatment in return for supporting Nicolas Sarkozy in the 2007 presidential election.

They have suggested Lagarde – who at the time was finance minister – was partly responsible for "numerous anomalies and irregularities" which could lead to charges for complicity in fraud and misappropriation of public funds.

The investigation centres on her 2007 move to ask a panel of judges to arbitrate in a dispute between Tapie and Credit Lyonnais, the collapsed, partly state-owned bank, over his 1993 sale of sports group Adidas.

Tapie had accused Credit Lyonnais of defrauding him by consciously undervaluing Adidas at the time of the sale and argued that the state, as the former principal shareholder in the bank, should compensate him.

His arguments were upheld by the arbitration panel but critics claimed the state should not have taken the risk of being forced to pay compensation to a convicted criminal who, as he was bankrupt at the time, would not have been able to pursue the case through the courts.

The payment Tapie received enabled him to clear his huge debts and tax liabilities and, according to media reports, left him with 20 million-40 million euros which he has used to relaunch his business career.

Tapie on Thursday said he "is not at all worried.

"When an abritrage is conducted, it is done according to rules," he told Europe 1 radio. "If there had been something questionable, it would have been known a long time ago."

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ECONOMY

Make reforms while sun shines on world economy: Lagarde

International Monetary Fund chief Christine Lagarde has urged France and other countries to push through reforms "while the sun is shining" on the global economy.

Make reforms while sun shines on world economy: Lagarde
International Monetary Fund chief Christine Lagarde. Photo: AFP

In an interview with France's Le Journal du Dimanche published on Sunday Lagarde said the strength of the global economic recovery had taken the IMF by surprise.

“In 2017, for the first time in a long time, we revised our growth forecasts upwards whereas previously we used to lower them,” she said.

Global growth of 3.6 percent was both “stronger and more widely shared” in 2017, she said, noting that developed economies were now growing again under their own steam and no longer merely being pulled along by demand in emerging markets.

Lagarde said the favourable climate lent itself to implementing reforms.

“When the sun is shining you should take advantage to fix the roof,” she said, using one of her favourite maxims.

This year's global growth is on a par with the average of the two decades leading up to the global financial crisis of 2007-2008.

The IMF has forecast a further slight improvement in 2018, to 3.7 percent.

In Lagarde's native France, seen for years as one of Europe's weak links, the recovery kicked in in earnest this year.

From 1.1 percent in 2016, growth is expected to rise to 1.9 percent in 2017 — still short of the 2.4 percent forecast for the eurozone as a whole but better than the 1.6 percent initially forecast in the eurozone's second-largest economy.

Centrist President Emmanuel Macron aims to consolidate the momentum and bring down stubbornly high unemployment with an ambitious programme of labour, tax and welfare reforms.

Lagarde said the changes were key to boosting France's credibility at a time when Macron is pushing for reforms at the European level, including closer integration among eurozone members.

The managing director of the IMF was France's finance minister in 2008, when the euro looked to be in serious jeopardy.

Nearly 10 years later, the currency is out of the woods.

But, Lagarde warned, “the mission has not been accomplished — and maybe never will — because Europe is not united on moving towards greater integration while maintaining national sovereignty.”