Transcript of a Press Briefing by Gerry Rice, Director, External Relations Department, International Monetary Fund

May 31, 2012

Washington, D.C.
Thursday, May 31, 2012
Webcast of the press briefing Webcast

MR. RICE: Good morning everyone and welcome to this press briefing from the International Monetary Fund. I am Gerry Rice of the External Relations department and as usual this briefing is embargoed until 10:30 am Washington time.

Before we begin with questions in the room let me just give you a few very short housekeeping things. In terms of the Managing Director, I can tell you Christine Lagarde will be visiting Stockholm on Monday, June 4, to attend the International Monetary Conference. The next day, Tuesday, June the 5th, Madame Lagarde will participate in a joint bank of Latvia IMF conference in Riga to review the economic recovery in the Baltics and take stock of the lessons learned. That conference will be webcast live on our website. On Friday, June 8, the Managing Director will give a keynote speech at the annual leaders dialogue in New York, which is hosted by the Süddeutsche Zeitung and the Atlantic Council, and again, this will be webcast live.

Turning to our first Deputy Managing Director, David Lipton. David will visit Beijing June 7 to 8 to conclude the Article IV Consultation with China. He will then travel to Tokyo June 11 and 12. Finally, our Deputy Managing Director, Nemat Shafik, today in Brussels delivered a keynote speech on growth in Europe at the Brussels Economic Forum, and you can find that speech on our website. With that again let me turn to you in the room and as well as to our friends online.

QUESTION: My first question is did Madame Lagarde apologize to the Board?

MR. RICE: The Managing Director briefed the Executive Board on her travels, and at the beginning of this meeting the other day, she said that she regrets that her remarks were misunderstood and caused offense. That was not her intention. The Managing Director and the Fund have always said that we have great respect for Greece and the Greek people and the sacrifices that many are making to overcome the economic crisis. As you know, over the past few years the IMF has made great efforts to help support Greece in tackling this crisis. We are deeply aware that Greece continues to face a daunting and difficult situation. We continue to believe that if all players fulfill their responsibilities and the right policies are implemented that Greece can overcome this situation and build a better future, and the IMF remains fully committed to supporting Greece in this effort.

QUESTION: What did she mean about Greece paying or not paying taxes? Is it possible to tell us your position on this very important and very sensitive for the Greeks issue?

MR. RICE: As we have said on many occasions, it is vitally important that the adjustment underway in Greece be fair and equitable. That means everyone paying their fair share of taxes, including those high-income earners and that's why the improvement in tax administration is a top priority in the program.

QUESTION: How does the IMF evaluate the strong reactions in Greece, in France and the rest of the world regarding the recent comments of Madam Lagarde?

MR. RICE: I think I just responded to that. Perhaps just to reiterate again as we've said here, as I've said and as the Managing Director has said, we have the greatest respect for Greece and the Greek people. I think my answer responds to your question.

QUESTION: Are these reactions unjustified?

MR. RICE: Again as I've said, we hold the people of Greece in the greatest respect and I can only repeat that the Managing Director when she discussed with the Board the other day, as I said, regretted her remarks having been misunderstood and caused offense.

QUESTION: The last question for this if you don't mind, what is the reason that so far the IMF has not issued an official statement?

MR. RICE: I'm speaking officially now for one thing, and I think also there was a statement from the Managing Director on Facebook. Again, I'm speaking officially now and I hope you can report what I've said.

QUESTION: Today Mario Draghi said that the Spanish government has underestimated the financial problems in Spain especially regarding Bankia's nationalization. Does the IMF agree with these comments? The second question is could you advance some of the main issues that are going to be discussed this afternoon between Madame Lagarde and the Spanish Vice President Soraya Sáenz?

MR. RICE: Maybe on your second question first, I can confirm that indeed the Managing Director will meet with the Vice President Madam Soraya Sáenz de Santamaria this afternoon to discuss recent economic developments in Spain and the Eurozone. In terms of the actions in the financial sector, these have been to date broadly in line with the recommendations in our Financial Sector Assessment Program and we issued the recommendations on that a couple of weeks ago you may recall.

QUESTION: Coming back to the Eurozone, as you know, the debate is going on as to how to deal with the bank situation not only in Spain but elsewhere. Spain is obviously the pressing point right now. Where does the IMF stand on how the Eurozone should be taking on this? I know you've said that it needs to take a direct stake in these banks. Do you maintain that position? Is there anything further? The E.U. has talked about a guarantee fund now. It all seems to also be taking a lot of time and there doesn't seem to be much time; borrowing costs are going up pretty rapidly. Today we saw Italy above 6 percent. Where does the IMF fall on how this should be tackled and how quickly?

MR. RICE: As you know, we’ve been calling for some time for a strengthening of crisis management tools in the Eurozone and a clearer, stronger vision of the overall Eurozone architecture. What I would say in response to your question is I think we welcome the discussions in Europe on these issues. I don't have an immediate comment on today's developments. But generally, the Fund's position and again as we've said many times, is that stronger risk sharing mechanisms will be desirable and that financial integration would be bolstered by unified supervision, a single bank resolution authority with a common backstop and a single deposit insurance fund.

QUESTION: To follow-up on that, I hear your reiteration of what you're calling for. What I do not hear is whether there is any urgency or not, whether there is any sort of timeline, whether we're at the eleventh hour or the first hour? I think one of the things that the IMF was criticized for by its auditors was then lack of warning that the IMF didn’t give ahead of the 2007, 2008 and 2009 crisis. If you could clarify exactly how urgent movement toward stronger risk sharing is for Europe and whether Europe has weeks, months or years to resolve this issue.

MR. RICE: As you know we’ve been calling and laying out ideas again on how we think crisis management tools in the Eurozone could be strengthened and how the architecture could be strengthened, the two points that I mentioned earlier. We have been speaking to those issues with a sense of urgency and clearly the crisis in Europe continues to have an urgent aspect. I don't have for you days, weeks, months or a timeline on it, but the sooner the better.

QUESTION: I want to get back to you about the recent comments of Madame Lagarde on—lot of questions—from many of the Greek followers of mine saying whether Madame Lagarde is going to address the Greek people and apologize addressing the Greek people about her inappropriate comparison between Niger and Greece.

MR. RICE: Again I’d refer back to what I said to your colleagues here that the Managing Director of the Fund has the greatest respect for Greece and the Greek people. On your particular question, what’s important to bear in mind here is that the IMF is an institution of 188 members of which more than 70 are low-income members and it's our responsibility to respond to the entire membership. Countries have different problems, advanced as well as low-income countries, and we stand ready to help them all.

Let me turn to a couple of questions online and then I'll come back to the room. I see that we have a question on the Dominican Republic and I want to take it because this question has come up before and I have not responded. So let me take this:

When will the IMF's Article IV mission come to the Dominican Republic and what is its advice on fiscal policy?

What I can say is that our standby arrangement with the Dominican Republic expired on March 8, 2012 and Fund staff are now preparing for the coming Article IV consultation and post-program monitoring which is expected to take place once the new government is in office. The dates for a possible mission are still to be determined.

I also have another question on line: Does the IMF have comments on the direct trading of renminbi and Japanese yen starting on June 1? We welcome direct interbank yen-yuan trading. It's an important step toward greater financial integration between China and Japan.

QUESTION: I have a question on Spain. Many analysts believe that the real problem of Europe is Spain is not Greece and they are saying that Greece actually is a piece of cake. What is your position on this?

MR. RICE: I would certainly agree that Spain is not Greece, and as I just said in the context of another question, each country faces a very different set of challenges and it's probably not useful to try and lump them together in a generic way.

QUESTION: A follow-up on Hungary. I was wondering whether actual negotiations have started on that or does the IMF continue to wait for the E.U. to give its approval for these talks to take place?

MR. RICE: No dates for a possible start of negotiations. We do however continue to be in touch with the Hungarian authorities and the European partners on all actions needed including beyond E.U. treaty infringement to ensure central bank independence. I think I'm going to make this the last question on Greece lest we become a Greek press conference.

QUESTION: One question which is much more important than my previous one I think. I want to know your official stance, your official position, about whether the majority of the Greek parties in Greece want to—aafter the Greek elections which is the renegotiation of the fiscal program in Greece to change some terms of this program. And I want to ask you if you are open to further ideas, further proposals, suggestions, from the Greek authorities elected after the elections? Is there any flexibility to do that?

MR. RICE: I want to be clear. I'm not commenting on the elections. The elections are a matter for the Greek people. Separate from the elections as I’ve said here before, the basis of our discussions will continue to be the objectives of the program that has been agreed. Clearly if a new government would have some ideas how to better achieve the program objectives, we are open to discuss them, as is the case in all the programs that we support.

QUESTION: I know you didn't want any more on Greece, but it is one of the most important countries right now that the Fund is focusing on. Is there a mission planned to go there soon? I saw some reports talking about a possible mission. Do you know of any mission plans?

MR. RICE: No. There won't be a new mission until after the elections and a new government is formed.

QUESTION: On Spain, I have a couple of different questions. In estimating how much demand for IMF loans as Christine Lagarde referred to in the new fundraising goal, you had to do a scenario analysis as to how much some countries may need. I’m wondering if, one, whether Spain was on that list; two, whether Lagarde will discuss contingency loans with the Deputy Prime Minister today; and three, would it be more costly for Spain and Europe to directly inject capital into the Spanish banks or more costly to loan Madrid the money to then inject into the banks?

MR. RICE: This actually ties to another question I’ve just seen online—but they’re asking what's the nature of today's meeting between the Managing Director and the Spanish Vice President, what will be on the table, what do you expect?

Folding my answer into what has already been asked, I can tell you that the IMF is not drawing up plans that involve financial assistance for Spain, nor has Spain requested any financial support from the IMF. Let me add in this context that the Article IV consultation will start its visit to Spain on June 4 and at that time we will be discussing with government officials and social partners the recent economic developments and the challenges facing Spain as we do every year, and at that time we will have a concluding statement as we normally do toward the end of the mission, so that's probably going to be somewhere around mid-June.

QUESTION: The other part of that question about whether Spain was on the potential demand list; that you had to draw up a scenario of what you member countries might need. You came up with I think originally $600 billion in extra cash for the IMF. Was Spain part of that? And the other part of the question, which would cost more, direct injection of capital E.U. capital into Spanish banks or loans to Madrid which then are injected into the banks?

MR. RICE: To repeat what I said, we are not drawing up plans that involve financial assistance for Spain nor discussion scenarios of a standby facility or financial assistance for Spain.

QUESTION: The cost issue which is a separate question, which would cost more?

MR. RICE: I don't have any comment for you on that.

MR. RICE: Let me take another online and then I'm going to come back maybe for one more in the room:

The euro has depreciated by 12.7 percent year over year to the U.S. dollar. Could a further devaluation of the euro freeze wage reductions and internal devaluation in Greece, Portugal and Ireland?

My response on that would be that I wouldn't want to get into here assessing or comment on exchange rate changes, but this is something that of course is discussed when our missions go to these countries for their quarterly reviews in the case of the three countries that are mentioned.

QUESTION: Last week the president of the PASKO Party, Evangelos Venizelos, and as you know the former minister of finance, accused openly the Confederation of Greek Industries during the negotiations for the program; they got involved and asked for more cuts in salaries especially in the minimum I think wage—demand. Are you aware of or is there any comment?

MR. RICE: What I’d say is these are internal Greek political matters and I wouldn’t have any comment on that.

QUESTION: On Spain, if Spain asked for money, does the IMF have the capability to respond?

MR. RICE: It’s a hypothetical question obviously, and just to repeat, there has been no request for financial assistance from Spain and the IMF is not making plans for financial assistance to Spain. Thank you so much.

QUESTION: It’s about the Eurozone because Greece existing from the Eurozone concerns all of the Eurozone. Do you believe that the danger of Greece getting out of the Eurozone is a realistic scenario?

MR. RICE: What I would say, is perhaps to repeat a bit what I said at the beginning, that we continue to believe that if all players fulfill their responsibilities and the right policies are implemented, Greece can overcome their situation and build a better future. Thanks very much. I appreciate you coming. Thanks to our friends online. We'll see you all in a couple of weeks.


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