PARIS (MNI) – The growing strife in Egypt and its potential impact
on oil prices is “clearly a concern” for the global economy, France’s
Finance Minister Christine Lagarde said Thursday.

However, Lagarde said, “We must be wary” of pre-mature predictions
on the economic impact, and she noted that there was a “good level” of
oil reserves around the globe.

Lagarde appeared to call on Egypt’s president Hosni Mubarak to cede
to the protests and yield power in the name of stability.

“My dear hope as a person and member of the French government is
that the situation will settle as quickly as possible and a transition
will be organized in short order,” she said.

She tied the spike in oil prices, exacerbated by the events in
Egypt, to one of the priorities of France’s G-20 presidency — to tackle
the volatility of commodities prices. Echoing recent comments by her
boss, President Nicolas Sarkzoy, Lagarde argued that work on improving
regulation of commodities trading lagged behind that for purely
financial instruments. She said there needs to be an “honest” debate on
the role of speculation in the spike of raw materials prices, including
food as well.

“Clearly the tension and the volatility that we see now, as we
speak, on the price of oil is one of these symptoms of the lack of
stability, lack of predictability, that is so much at the heart of our
agenda concerning volatility of raw materials prices,” she said.

The finance minister largely repeated France’s already-known agenda
for the G-20, which she said includes three principle areas: improvement
and reform of the international monetary system; tackling the volatility
of commodity prices; and strengthening world governance.

On the world monetary system, she noted that there exists “no forum
where the leaders of the world’s biggest currencies can meet” to discuss
exchange rate issues. She made clear she was referring to the fact that
China, the largest holder of global foreign exchange reserves, needs to
be more closely integrated into global financial institutions.

In this regard, she said that including the yuan in the basket of
currencies that make up the IMF’s special drawing rights (SDRs) was an
“interesting” idea and she noted that many countries favored the idea.
SDR’s are a “useful tool in times of crisis,” she said.

Lagarde acknowledged that work is ongoing among European finance
ministers on a number of proposals to attack the sovereign debt crisis
in Europe. Among those are measures aimed at fortifying the European
Financial Stability Facility (EFSF).

“It’s not necessarily a question of enlargement” of the EFSF, she
said, but rather giving it “full effectiveness and flexibility,” which
can take “various forms.” Among plans under consideration, she said, was
empowering the EFSF to buy government bonds — but she did not
elaborate.

Lagarde downplayed the widely reported notion that France and
Germany are working behind the scenes on a grand plan that they will
unveil at the EU summit on Friday, though she said the two countries are
cooperating on the issue.

“France and Germany are reflecting and working on common plans.
There are common propositions,” she said. But they must first be
discussed and debated by all EU governments before they are evoked
publicly, she added.

In any event, the plans for attacking the debt crisis are “not the
order of the day” at Friday’s summit, Lagarde said. “May I remind you
that the summit tomorrow is dedicated to energy,” she said. “And it is a
big enough problem.”

Lagarde reiterated France’s support for a global financial tax, but
said the trick would be to find the right transactions to tax, which
means the most transparent ones. She said such a tax had appeal, because
it offered the opportunity of imposing a small rate on a very large
base, which was the most efficient way to go. In that context, she said,
foreign exchange transactions — because of their volume and their
transparency — make a good candidate.

But for such a tax to win the day, it will require a “coalition of
the willing” to find the right formula and to convince those who resist
the idea. France, along with Germany and the UK, are supporters of such
a tax.

–Paris Newsroom, +331-42-71–55-40; bwolfson@marketnews.com

[TOPICS: M$X$$$,M$F$$$,MGX$$$,MT$$$$]