Transcript of a Press Briefing by David Hawley, Deputy Director, External Relations Department, International Monetary Fund

December 15, 2011

Washington, D.C.
Thursday, December 15, 2011
Webcast of the press conference Webcast

MR. HAWLEY: Hello everyone. My name is David Hawley and I'm Deputy Director of the External Relations Department and this is another of our regular IMF press briefings. As usual, the briefing is under embargo and that's until 10:30 Washington time and that's 1530 GMT. Before going to questions, as usual let me make a few housekeeping and other announcements.

As you may have seen, yesterday the Managing Director Christine Lagarde announced a new Director of the External Relations Department, Gerry Rice, who has been Acting Director for several months and will take up his new position as director by the end of the year. Today at 10:00 a.m. Washington time the Managing Director will give a speech at an event organized by the State Department and hosted by U.S. Secretary of State Hillary Clinton. She will be speaking on women in public service. Next week the Managing Director continues her travel among the membership. As you know, she has made a number of trips since joining the Fund. Next week she is going to be in Africa, on the 19th and 20th in Lagos and Abuja, Nigeria, and on the 21st and 22nd in Niamey, Niger. In both of those destinations there will be a press conference and you can follow-up with media relations for further details.

The Fund is going to be closed for business on Monday, December 26, and on January 2, 2012. The usual off-duty contacts will be available to you. And because we're entering the holiday period, our next briefing will be on January 12, 2012. With those, I'll take questions if I may.

QUESTIONER: David, we know that a small mission, or maybe it's not even a mission, a visit is going to Italy. This is not the staff monitoring program. Is there any sort of discussion about when that monitoring program is going to take shape there? There is talk that the monitoring mission might be delayed because conditions in Italy's opinion have improved meaning that the bond yields have come down. Can you give us any update on what's going on there?

MR. HAWLEY: There is as you say a small mission which is headed by Asim Hussain and Antonio Spilimbergo. They will be traveling to Rome next week to meet with the new authorities. They will receive updates on recent budgetary developments and discuss the modalities for future monitoring missions. This is not, let me underline, a monitoring mission, but we consider this a staff visit to give the mission chief and the authorities the possibility to meet to review the economic situation which is valuable. There are no dates yet however for future monitoring missions.

QUESTIONER: May I have a follow-up on that one? I think the idea of the monitoring mission was that it was so urgent that you wanted to give the authorities a package a reforms, basically a thumbs up or a thumbs down. The monitoring was pretty urgent over the G-20 meetings and now it just seems to have faded.

MR. HAWLEY: I described the sequence and the timing and I have nothing to add to that.

QUESTIONER: To follow-up on that, there was urgency expressed by Lagarde and other IMF officials at the Cannes G-20 for the monitoring mission to go forward in Italy. Are you saying now that there is not an urgency?

MR. HAWLEY: I'll repeat what I just said. We have a mission going next week, a small mission, that will discuss the modalities for the monitoring mission. That's a fairly clear sequence.

QUESTIONER: On the additional resources that the euro summit agreement discussed at their summit last week, the statement spoke itself but it made no mention of how the money, to use IMF terminology, the modalities of that money which account, how it was going to be used, et cetera. And yet the IMF assumed and put on its front page that it was going to go into the general resources account. One, can you tell me why the IMF made that assumption? Two, are there any other assumptions that the IMF has made about that money that you would like to let us know about?

MR. HAWLEY: On the General Resources Account (GRA) point, simply that the GRA is our main financing source. That's the source of that assumption.

QUESTIONER: May I follow-up on the additional resources for the IMF? For the [200] billion euros from European nations, how would the money come? Will it be created from the balance sheets of central banks or will that be created by the central bank and given to the IMF? If the money would be for the general resources for the IMF and not for specially the administered account, will that spread the contagion across different members of the IMF?

MR. HAWLEY: There's a point to bear in mind which is that in announcing their willingness to consider a financial contribution to the IMF, the European leaders made clear that they would going to take a further 10 days to finalize that proposal and that date has not yet been reached so that I can't go into how money would come from the Europeans in detail.

QUESTIONER: To follow-up on that one, we just had a G-20 deputies' meeting in Mexico City where President Calderon said that they hope to get some deal on IMF resources. What happens now? Does the IMF have to pull together some proposal on how much it needs? How does this process really work out?

MR. HAWLEY: I think the way to look at it is this. The Fund has adequate resources to meet present needs, but as the Managing Director has made clear, that if there's an intensification of the crisis there may need to be augmentation of the Fund's resources, an augmentation of resources that would allow the Fund to fulfill its systemic role which is preserving the stability of the international financial system. That's the big picture.

A number of members have expressed a willingness to join such an effort of an augmentation of the Fund's resources, a recent example being the European proposal. What is happening now is that conversations and contacts are taking place between the Fund and its membership about the scale and the manner in which this could be brought to a conclusion, and that's where we stand at the moment and because we're in that stage, I can't offer much by way of detail.

I'll take if I may a couple of questions from the Media Briefing Center. The questions is as follows I noted that Poul Thomsen, the Mission Chief for Greece, says that debt sustainability analysis of Greece indicates that if Greece's potential growth is not boosted over the medium-term there will be a problem. Can you define what you understand by medium-term? I can only say that I think medium-term speaks for itself and I'm not going to assign a particular period of time for that. I've also got a question from Matthew Lee at Inner-City Press on Hungary. His question is How would relations and a program with the IMF be impacted by the prime minister's announced plan to assert control over the central bank and demote its president? I can answer that by saying that we are carefully examining the recent legislative proposals with respect to the central bank and erosion of central bank independence would be of great concern.

QUESTIONER: Concerning Greece and listening to Mr. Thomsen's discussion a couple of days ago, I'm puzzled as to why the last disbursement was made because it seemed in previous situations, countries that had not performed as Greece had wouldn't have gotten a further disbursement.

MR. HAWLEY: That's your judgment. The reason that a disbursement is made in the case of Greece or in the case of any country which has a program relationship with the fund is that the staff and management on the one hand and importantly the Executive Board on the other are satisfied that the member in question is undertaking policies that are in compliance with what it's agreed with in the context of the program.

QUESTIONER: Is there a real consideration to be made about the Fund's resources being exposed to too much risk in one place? Already right now most of the IMF's lending is into Europe and we're only talking about peripheral nations. If as the IMF itself has discussed more than just speculatively that other core nations or core nations in Europe were to request loans, that would put the IMF in a position that it's never been in in terms of having basically all of its resources in one basket, so to speak. Is that a legitimate concern?

MR. HAWLEY: Portfolio concentration is obviously a consideration for the Fund and it has been a consideration in the past. If you cast your mind back to the historic transformation of the centrally planned economies 20 years ago, there was a heavy concentration of Fund resources in one segment of the membership so that it's not historically unprecedented, and there would be other examples. The Fund in making lending is careful to ensure that programs are properly financed including by other parties. Program design importantly is one of the safeguards we have to ensure that risk is mitigated. We don't lend unless we're confident that programs will succeed.

I have a question online on Spain. This comes from Estella Santos of Expansion who asks, Since your last forecast, Spain has changed the government. What are the most important reforms for this new government and will Spain be affected by the growth outlook? It's critical for the new government to quickly deliver the necessary strengthening reforms that Spain needs. Priorities should be reforms in the labor market to reduce unacceptably high levels of unemployment, to make the ambitious medium-term fiscal targets credit and to continue the reforms of the financial sector. Lesley?

QUESTIONER: A quick follow-up on Spain. Has an IMF mission or -- been to speak to the new Spanish government yet?

MR. HAWLEY: I haven't anything for you on contacts with the new government, but I can confirm that there are no negotiations with the Spanish authorities on any form of IMF financing since that was your question.

QUESTIONER: No, actually it wasn't. I was interested because there were indications that the Fund was going to reach out to the new government.

MR. HAWLEY: I can follow-up if there's something to add.

QUESTIONER: My next question is going to be about Egypt. We have a report out of Cairo today where a minister quoted saying "Egypt may need to restart talks with the IMF to obtain the loans." Are there talks with Egypt right now? Have the Egyptians asked for formal negotiations on this? What does the IMF think about the $1 billion loan from the Army to the central bank?

MR. HAWLEY: I don't have too many specifics on that. The authorities have not requested an IMF arrangement. The Fund has been very supportive of Egypt and we remain committed to do so in the future. In past months we have maintained a close dialogue with the authorities and, as you know, we've been in Cairo on a number of occasions to take stock of economic developments and assess financing needs. But there isn't too much fresh on the Egypt front.

QUESTIONER: A couple of questions on additional resources for the IMF. European nations mention that there would be 50 billion euros additional resources for IMF coming from non-European nations. You have some details. Who would be interested in doing that? Will additional resources be impacting the voting share of IMF in the future? And do you have some comments like Federal Reserve Chairman Ben Bernanke's recent comments and other U.S. officials' comments that the United States does not have interest in helping the IMF to get additional resources?

MR. HAWLEY: On the composition of any financing that might come from the Europeans, that's a question to address to the European authorities. On changes on quota shares, that takes place in the context of quota review which is an assessment of two things, both the desired size of the Fund as a financial institution and the various shares, the size of relative shareholdings of members and so changes in quota shares are taken place in the context of quota reviews. So the specific answer to your question is, no, it would not occur as a result of a bilateral or other loan.

QUESTIONER: A couple of weeks ago Mr. Rice said that the European firewall needed to be large enough to be effective. Was the decision at Brussels creating a firewall that is big enough to be effective?

MR. HAWLEY: I would refer you to what the Managing Director said when she was making an assessment of the outcome of the summit. And without going into too much detail since you can check her statement, she welcomed the agreement to enhance financial discipline and strengthen economic coordination, she welcomes the decision to accelerate the enter into force of the ESM and of course she welcomed the willingness of the E.U. member states to provide additional resources. So rather than give you a binary answer to your question which I gather is what you'd like me to do, I'd prefer to refer you to what the Managing Director said.

QUESTIONER: Both she and Olivier Blanchard said that it was an important step. What are the next steps if it's just a step?

MR. HAWLEY: The next steps are it is important now to implement the summit decisions. Those are the next steps.

QUESTIONER: Is that to say then that those are the only steps that are needed, is to implement the decision?

MR. HAWLEY: I think implementing the summit decisions is an appropriate set of next steps.

QUESTIONER: David, you know what I'm saying. I'm asking you whether the IMF, since it's indicating that it believes the euro summit is just a step, obviously implementation of that is certainly obviously the next step of course. But I think you clearly understand what I'm asking you, is whether the IMF considers that there are other steps beyond simply implementing last week's euro summit agreement?

MR. HAWLEY: Yes, I do understand your question and I think it's an appropriate and adequate response to say that what Europe should do now is implement its summit decisions.

QUESTIONER: A question about the possibility of the IMF going to China and getting further funds to save the European countries. Some people after the E.U. summit see the 200 billion E.U. commitment to the IMF as the so-called seed money in a way to show their commitment to work with the IMF, and also to show that they hope that the IMF could get money from other countries not including the BRIC countries. But in China this issue is being debated whether China should put money into the IMF and then go to the euro because even though the IMF has done a good job in the last 2 years saving Greece, the result so far is not fully convincing. So from the IMF's point of view, how would you convince to other countries that it's wise for them to put money into the IMF to save Europe? The other side is also that is the IMF in contact with the U.S. for further resources to put into European countries?

MR. HAWLEY: I've got two points to make in response to your question. The way to think about possible augmentation of Fund resources is not to see it as devoted to a particular segment of the membership, but to allow the Fund fulfill its systemic responsibilities; in other words, providing confidence, support and stability to the system as a whole. In regard to your second question, I don't at this stage have any information on any bilateral conversations we might be having.

I have a question online on Portugal. "Portugal has a strong structural reform component on its adjustment program that has not of quantitative nature. Could failure to achieve it as the fiscal goals be a trigger to a negative review and deny another disbursement?" I think the response to that is to note that we will have the second review of Portugal's program at our Executive Board on Monday. So until that review is out of the way, I can't respond to a particular question on Portugal. We expect the questions could be answered at that point.

[A journalist] has come back reminding me that she asked whether Spain will be affected by the global outlook. This is an opportunity to remind you that the next update of the WEO is going to be released in late-January so that that is the point at which the Fund will offer its view on both the outlook and its impact on particular countries.

QUESTIONER: I wanted a qualification for the general account or administrative special account. If the European money through the bilateral loan will be put into a special account, then who may take the potential cost of the loss of that money? So I mean every member country should share that cost?

MR. HAWLEY: This is a technical question and I'll answer it at a very high level of generality if I may. The distinction you should consider between the administrative account and the GRA is rather between the use of the funds. We have used administrative accounts for a specific purpose including for example some of our lending to low-income countries. The GRA money is used for the Fund's general purposes so that that is the distinction between the two. And given that that is the distinction, I don't want to be drawn on other comparisons between them.

QUESTIONER: The U.S. Treasury has very openly said that it wants this European to go into the administered account. Has there been any decision yet by the IMF which account this money can go into or is that something that develops over time and will be discussed by the membership?

MR. HAWLEY: As I say, we're still in discussion with our membership on how augmentation might be carried out. May I take a question from the Media Briefing Center? Matthew Lee of Inner-City Press notes that South Sudan intends to join the IMF and what are the next steps and what can the IMF do for South Sudan? Discussions or work on South Sudan becoming a full member of the IMF are well advanced. South Sudan's main challenges are maintaining economic stability, investing its oil resources wisely in social and infrastructure development and to build an environment and institutions to support sustained economic development. In terms of what we're doing to support these policy goals, we're stepping up on our technical policy advice in areas where the Fund has expertise and we have a resident adviser now in the country.

QUESTIONER: Does the Fund have a view on what would be most financially and economically effective and beneficial for Europe as to whether funds should go into an administered account or general Fund resources? Or if it does have a view, does it just not wish to divulge it now?

MR. HAWLEY: As I say, these are matters in discussion between the Fund and its membership and I haven't anything to add to what I've said earlier.

QUESTIONER: I just want to be clear that you're not going to tell me even if the Fund has a view at all?

MR. HAWLEY: I'm telling you that the Fund is discussing with its membership modalities of augmenting our resources. I've said that a number of times during this briefing and I don't have anything to add to that.

QUESTIONER: I'm interested to find out whose decision it was for the Managing Director(MD) to go to Niger and why does the M.D. think that Niger was the most appropriate country to go to?

MR. HAWLEY: We'll hear more from the M.D. during the course of her visit, but I would note that in the travels she's undertaken throughout the membership, she's been to Asia and of course to parts of Europe and most recently to Latin America, she's visited countries in a wide range of circumstances. In this relatively short visit to Africa next week she'll be visiting a country, Nigeria, which is Africa's most populous, and in Niger one of the poorest countries in the continent. But let's hear more from her when she's in the country.

QUESTIONER: Can you give us any sort of idea when the Managing Director might make herself available to the press either through interviews or for the wire services that cover her most regularly? I believe she's given an interview to the F.T., to the BBC and I'm not sure if there have been any other interviews given.

MR. HAWLEY: There have been a lot of other interviews.

QUESTIONER: There have?


QUESTIONER: None of us, the main wires, have had any access to her. So that hasn't been made apparent to us. I'm wondering of if you could give some sort of timeline when the -- since the Managing Director has been here since July when she might be made available or make herself available to the press that cover her internationally and daily?

MR. HAWLEY: As I say, she's been constantly in the press and talking to press. She's been on her travels and has spoken to the press certainly in Washington. I hear that you want to hear from her at an early opportunity and we'll take that on board. If there are no further questions, I'll wrap this up now with a reminder that we're under embargo until 10:30 and our next briefing is on January 12, and it remains to me only to wish you happy holidays.



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