French Finance Minister Christine Lagarde said on Monday that the worst of the United States mortgage crisis was over even if some US investment houses and funds could still be in trouble.
Stock exchanges worldwide were sent reeling this month as US borrowers with risky credit histories — the so-called subprime sector — defaulted on their mortgage repayments.
“I think that the worst of the crisis is behind us,” Lagarde said in an interview to BFM radio after Asian stock markets roared back on the heels of the European and US rallies on Friday.
“We had a nice rebound” in the markets, she added, after the US Federal Reserve cut the lending rate it charges commercial banks.
“It’s a very, very good sign,” Lagarde said.
“Some houses and funds on the US markets could find themselves in difficulty. This is a classic case in the US economy and finance which often becomes overzealous,” she added.
Lagarde spoke ahead of a meeting on the economic and financial situation with President Nicolas Sarkozy, who returned on Sunday from a two-week vacation in New Hampshire, in the United States.
According to the experts, the US mortgage crisis is not likely to happen in Europe where the conditions for borrowing money are usually tougher and the demand for buying homes remains strong.
Lagarde also said she was unsure whether France would reach its target of 2,25% growth in 2007.
“All of our budget calculations were made on the bases of 2,25%. Will we reach it? I don’t know,” she said.
“We will have to have extremely ambitious goals for the third and fourth quarter in order to reach it,” she said.
“We will have to see based on the consequences of the financial crisis and of what will happen with the markets in terms of businesses and consumer spending,” she said.
The French economy expanded at a slower-than-expected pace of 0,3% in the second quarter from the previous quarter, figures released by the national statistics institute INSEE showed last week.
In the first three months of 2007 France’s gross domestic product (GDP) grew by 0,5%. — AFP