Transcript of a Press Conference on the International Monetary and Financial Committee's 2010 Spring MeetingWith Youssef Boutros-Ghali, Chairman of the IMFC and Minister of Finance of Egypt, and International Monetary Fund Managing Director Dominique Strauss-Kahn, John Lipsky, First Deputy Managing Director of the IMF, and Caroline Atkinson, Director of External Relations
April 24, 2010, Washington, DC
|Webcast of the press briefing|
MS. ATKINSON: Good afternoon and welcome to the press conference after the IMFC, the Board of Governors of the IMF.
I have to my far right, John Lipsky, the First Managing Director of the IMF; Dominique Strauss-Kahn, the Managing Director of the IMF; and then, Dr. Youssef Boutros-Ghali, the Minister of Finance of Egypt and the Chairman of the IMFC meeting.
He will now begin this press conference.
It is live, and on the record.
I hope you will notice that it is also very timely, which is the first for a long time.
MR. BOUTROS-GHALI: Thank you, Caroline.
Good afternoon, all of you. We have just concluded the 21st meeting of the IMFC, the International Monetary and Financial Committee of the Fund.
We have surveyed many issues. First and foremost, the global economy. The global economy seems to be recovering. The worst is definitely behind us. But, we are not out of the woods yet. We see a strengthening of economic recovery, but we also see an unevenness in this recovery, unevenness within countries, and unevenness between countries.
In some cases we have found through the discussions we had that the recovery was not yet sustainable and still dependent on fiscal measures. And, for which there was little scope for reducing the fiscal stimuli. Other countries are beginning to show some self-generating momentum, and therefore are beginning fiscal retrenchment. However, again, there are weaknesses.
In other cases, in emerging market economies, recovery is strong, beginning to retrench on the various fiscal stimuli, and the picture there is much more encouraging, much more solid.
We looked at the financial sector. Of course, you will recall the crisis originated in the financial sector. The financial sector, a lot of measures have been taken. A lot of strengthening of financial regulations have been taken. We noted that. We discussed a number of rules and regulations that needed to be developed further, but we are not out of the woods yet. There are weaknesses. There are vulnerabilities. And, they will require continued vigilance and continued development of more measures of strengthening of the financial sector, in many countries.
We also discussed issues of market confidence. We see that market confidence has come back, but it is very volatile. The slightest incident creates all sorts of jumps in various indicators. We have also noted that a number of sovereigns are under pressure. And, the membership urged the Fund staff and management, and a number of large donor countries, to cooperate in assisting a number of sovereigns who are experiencing fiscal and debt difficulties.
We discussed also an important issue, in fact one that has inflamed many discussions; mainly the discussion of IMF reform, the quota and voice discussion, and the core principles of the governance of the IMF. Everybody reaffirmed our commitment to make sure that we get through the governance reform by January 2011 and the quota and voice reform by that date.
We have spoken of processes to bring this forward, a compact to bring this forward. Ideas have been put forward. We will be very busy in the coming months. I will, in coordination with the Managing Director, try and find a consensus whereby we can put something forward by the time the leaders meet some time in the fall.
Of course, low-income countries were very much on the radar. 2010 will see 65 million people added to the lines of poverty. Eighteen million of them are in Africa. All the membership agreed that this was inadmissible and that we should push for additional resources, additional support, within the IMF, and within other international organizations, so that this is addressed as early and as quickly as possible. Emerging market economies seem to be performing better. But then again, they have much further to go. And therefore, their performance will not dent the figures that I have just suggested to you.
Overall, the discussions were extremely constructive. We have initiated for the first time joint sessions with the G-20 and we are discovering both of us the synergy that can come from common work between the two groups, the IMFC and the G-20.
Let me ask the Managing Director for a few comments.
MR. STRAUSS-KAHN: Thank you, Youssef.
I would like to thank Youssef Boutros-Ghali for his excellent chairmanship of the IMFC, especially when he chairs in Arab. It is because of his real skill in chairing meetings that we are on time. So, we consider that it doesn't happen so often.
I think the two days of meetings, G-20 yesterday and the IMFC [today] was a different, another meeting around the IMFC, the breakfast this morning, and also the early warning exercise, all this has been a great lesson of multilateralism. And that will be for me the main lesson of the spring meetings. Clearly, we are entering now a fourth phase.
The first phase was after Lehman, and for some months where everywhere in the international community you had some panic facing the downturn and the policy to implement. Then, we have after April, in London, we had a second phase, a phase of action, where most countries implement the required stimulus, where the resources of the IMF have been increased, where the lending instruments of the IMF have been changed. And, when you look at all the figures, especially some kind of spreads, you see clearly that is the moment where things have changed.
Then, after the fall, you had a third phase, a kind of relief. And, most countries, the idea that the crisis was behind us. And, finally, the recovery was just at the corner of the street, has been accepted by too many, and even if we were always warning that certainly the recovery was there, even stronger, and sooner than expected, that was good news, but, that we shouldn't lose any kind of caution, we should really take into account all the downside risks and even if any kind of a double dip has never been the baseline scenario for the Fund, some tail risks were rather important, and we should take them into consideration.
And now, I think, we are entering the fourth phase, in which all the ministers there, the governors, are clearly aware that, well, the recovery is here, faster in some parts of the world, mainly Asia, more sluggish in other parts of the world. Especially the European Union. Japan, also. But, that even if the recovery is there. We really have to take into consideration the different downside risks that may materialize. And, the two principle ones, the most important of which we have been asked to work for the coming months, are, of course, unemployment which is still rising in many countries, advanced economies and the heavy burden of debt in especially, also, advanced economies, but not only. And then, the third problem, which has been discussed a lot, including this morning at the breakfast, the question of capital flows and capital inflows in emerging countries, the risk of a bubble.
So, this first phase, after panic action, relief, is clearly the phase of rebuilding, rebuilding the international institutions, and trying to make them more effective to be able to, not to avoid, of course, but at least to prevent and decrease the likelihood of any crisis in the future.
This covers three main areas which have been already mentioned by Youssef. The first one has to do with the financial sector reform. The theme that I used to, the idea I used to put forward for months, which is that we need coordination, is now something which is well accepted, that the rules of the game have to be almost the same everywhere, if not the same, at least they have to be consistent. The good example of this has been the discussion on taxation where some countries want to implement some taxation on the financial sector, some don't want it. But, everybody agrees that all this has to be done in the coordinated way.
So, coordination doesn't mean that the same kind of policy has to be implemented everywhere, because the structure of the industry, and integration of the industry is the no the same, but that when something is done, we have to look at only at the effect of what is done for the country, where it is done, but also the kind of consequences it may have on the rest of the world to avoid any kind of a regulatory arbitrage or something like this.
It is interesting to notice that as far as taxation of the financial sector is concerned, the countries, part of the world which is likely to implement something is the one having the problems in the banking sector. The others say we don't have a problem, so we're immune.
Maybe a bit shortsighted. Maybe if you had asked the U.S., the U.K., maybe some European countries before the crisis, if there financial sector was strong enough to resist any kind of crisis, they would have said yes. So, I'm not sure that this kind of instrument that is true also for strong regulation shouldn't be applied everywhere. Nevertheless, what is important for my view, my point of view, is this strong sense of the need, strong demand for coordination and for working together.
We have been asked to prepare a report assessing the state of the regulatory and supervisory reforms, the initiative on the resilience of the system, and we will prepare this for our next meetings.
The second big area has to do with the new exercise asked of the IMF by the G-20 leaders in Pittsburgh and where we delivered the first draft, the so-called mutual assessment process. The interesting thing is this first run of this analysis of the different forecasts of the different countries is that it shows, let's say, a reasonable optimism coming from the different countries. And when we put the figures together, they're rather consistent, but they're rather optimistic. And in our view, they may be a little too optimistic, but if the right policies are put in place to reach the targets which are being proposed by the countries, without the right policy and change in policy, there is little chance that what is assessed by the different countries and put together by the IMF will materialize. But, it is possible to do it. So that is the target. We have to try to do it. And then, the result may be much more interesting and much better than the one we have in the WEO, which is the forecast with the existing policies.
So, then we come to the second phase of this process, which is to provide the leaders meeting in Toronto at the end of June with policy advice on mainly two sectors, two questions, unemployment and debt, to be able to raise the growth potential and make it possible to reach something which at least will be close to the global exercise that we have shown.
And then the third area where multilateralism has been strong is the governance, the quota and governance issue. The commitment of yesterday, already, the G-20, more relevant because quota has more to do with the IMF than the G-20, so the strength of the commitment this morning by the IMFC to complete the shift in quota but also the governance reforms by the end of this year is something which I find very important, because as I already have said many times, this question has obviously some technical part, but it is mostly a political question. And, you won't achieve the quota share, won't achieve the governance reform, including the size of the Board, the way the Board is functioning, the selection of the Managing Director, a long list of questions, you won't achieve this only on the basis of technical considerations, but, of course, starting from a political will. And, my view is, this morning, is that in the IMFC, you can see this in the communiqué, the political will was strong, is proof of the confidence in the multilateralism.
I may end with the point I made at the beginning. I think this spring meetings for the IMF, and in some respect also for the World Bank, because they achieved their shift in quota, also, but at least I won't talk on behalf of Mr. Zoellick, but for the IMF and the G-20, the spring meetings have been a meeting where clearly the worry we may have had in the last months that with the recovery, the momentum for multilateralism will decrease. This worry has itself decreased a little. I think that I'm more confident than I was a few months ago, a few weeks ago, clearly different countries want to go on working together and that is probably for the global economy the best news that we could expect.
QUESTION: My question is, in your talks this afternoon, today with the Greek foreign minister, did he suggest that Greece might need a larger amount from the IMF than is currently being contemplated? And do you believe that the IMF package will be available by May 19th, the time of the deadline for the next Greek bond payment?
MR. STRAUSS-KAHN: I spoke with the Greek minister and all the results of the negotiations we had with the Greeks will be available at the end of the negotiation.
QUESTION: One question about Greece.
We know that Greece is now seeking aid from the IMF, how would you aid the country in the meantime to ensure the healthy development of the long-term financing and the euro currency?
MR. STRAUSS-KAHN: Also a very interesting question, and I'm sure you will find all the answers to your questions when the program with Greece will be public, after the end of the negotiations.
MS. ATKINSON: We will have repetition of those. Maybe in the back there. Hoping it is on a broader topic.
QUESTION: The Greek public, the majority of the Greek public is demonizing the IMF and think things are going to be worse than better. What is your message to the Greek public?
MR. STRAUSS-KAHN: Unfortunately, the Greeks are not the only ones demonizing the IMF. But, I think that the Greeks, as others, should see the IMF as it is today. The IMF is a kind of cooperative organization, where all the countries of the world work together to try to help those being in trouble. Today, Greece is in trouble. Tomorrow, maybe another. And so what is the IMF doing? Trying to provide advice on behalf of the entire international community, trying to provide resources to help on behalf of the entire community. So, the Greek citizens shouldn't fear the IMF. We are there to try to help them.
MR. BOUTROS-GHALI: We have dealt with two issues throughout the last two years when this crisis appeared, and there it was obvious that a number of countries needed the help of the IMF. There was an issue of stigma coming from the late '80s, mid '90s, the late '90s. Clearly, the direction that Mr. Strauss-Kahn has given to the institution, even before the crisis. Let me remind you, he was the first to call for an increase in fiscal spending, before the crisis was a full-blown catastrophe in the world economy. The logic and philosophy with which the IMF now approaches issues is more akin to that you would approach in a developing country, in an emerging market economy, where you have issues of poverty, where you have issues of income distribution, rather than the old philosophy whereby balance of payments viability was the overarching concern, at the cost of anything and anybody. So, I must emphasize, and if you can pass this message to the Greek people, it is a different institution. Emerging market economies have more of a say in how the institution is run. And this is how we reach the point of saying we want to change in quota, etcetera, and all these changes are beginning to come to fruition. They should give the institution the benefit of the doubt.
QUESTION: I want you to elaborate a little bit more about the countries that are likely to have taxes on the financial sector.
And my second question is, why generally 2011 to discuss this increase of new countries of developing countries shares and quotas in the IMF, World Bank? Why postpone this issue? It should have been discussed within this meeting.
MR. STRAUSS-KAHN: On the first question, as you know, we have been asked how to design a fair contribution of the financial sector. And, seems clear to me that many countries, including the U.S., including U.K., including France, including probably other European countries when I see the reaction of the European Commissioner, are keen to do something. Some already are in the process. In the case of the U.S., others are just thinking about it, but I think some countries, a handful of countries, will do something. Some other countries do believe that they don't need this. Probably, because their financial sector hasn't been hit so hard. The whole economy has been hit by the downturn, but not especially the financial sector and not especially the banks. So they didn't need to find public money to rescue the banks, so they don't see the necessity of implementing something that will create possibly a resolution fund for helping in the future.
We will see.
Maybe you were there when I held the opening press conference of these meetings. I said that what we are proposing doesn't stand alone. If you want really to decrease the likelihood of the crisis, if you want to curb the behavior, we need to have different tools. And the regulatory tools, of course, are very important. So, we are not arguing in any way that the taxation of the financial sector should be done instead of, in place of the regulation. It goes together. So, it depends upon the country. In some countries you may have a much stronger regulation than in others. Then you don't need taxation. In other countries, you may prefer where taxation is less strong, but then complemented by something on the tax side. That is the country's choice to do what they want to do. Our main point on which I'm really very strong is that all this has to be coordinated to avoid any kind of regulatory arbitrage.
My second point was, why 2011?
MR. BOUTROS-GHALI: Because we couldn't get 2010.
MR. STRAUSS-KAHN: In Pittsburgh, the point has been made by the leaders that we should do this before January 2011. Of course, I could have stood up and said, "You guys are too cautious, we can do it more rapidly." But, probably it would have been a good idea, because we did already a change in quota in 2008, you remember. And, then, this time it was the turn of the World Bank. And the World Bank had to do it. And, the same countries. Probably a good idea to do it in the World Bank and then go on again with the IMF.
The World Bank did it. I guess the Development Committee will confirm this tomorrow, at the same time the Development Committee will certainly confirm the capital increase of the World Bank, which is very welcome and a really big achievement by Mr. Zoellick. And then the World Bank has solved its problems for the time being, and we will go back to our own problem and deal with this change in quota.
MR. BOUTROS-GHALI: There is a very strong push by emerging market economies that they be recognized in the financial institutions. The reason why it is 2011, I may have said it in jest, but it is true. We couldn't get 2010. We couldn't get 2009. The obstacle is getting everybody to agree. There is 185, 186 countries. Some will have to give up some of their quota.
MR. STRAUSS-KAHN: John has something to add. I forgot something.
MR. LIPSKY: The negotiations will take place on the basis of, among other things, GDP data. We need to have the complete data. It will be 2008 data. Not yet ready. It will be in the next month. So at that time we'll be able to start discussing in concrete terms on the basis of the actual data that is going to serve as the basis for the discussion.
QUESTION: Did the International Monetary Fund meeting suggest any specific programs to its members that they can implement in their countries to address the problem of unemployment? This is the first question.
Second is, are you able to reform financial sectors while President Obama is unable to fight Wall Street right now?
MR. STRAUSS-KAHN: I will answer the first question, and Mr. Boutros-Ghali will answer the second one.
On unemployment, certainly, when we are asked by countries to give them advice, with or without a program, we do this. And these days, most of the questions are on one of the two questions I mentioned, unemployment and debt sustainability. So, on both questions we gave some policy advice. We tried to help the countries, including in rephasing or redirecting the stimulus which has been put in place, toward job generation and lowering the cost in the labor market, different kind of actions that may improve the level of employment. So we do this, either with country programs or with noncountry programs. It is a large part of what we are doing, that most of the people don't know, is that the large part of our resources are financial but also human resources are used for this kind of technical assistance that we provide to many countries, which don't need any kind of financial support, but do need technical assistance.
Now, on the other question, well, President Obama has plans to deal with the problems in his country. But, I have 186 members, so I'm not going to make comment on 186 policies, one after another. What is sure is that the crisis has already made an ending in the United States and we have identified more than one year ago, eight months ago on the first report on the first lessons of the crisis, maybe will remember this report, the reason why in our view this crisis has started, and among other causes, the main one, of course, had to do with lacks regulation and bad supervision in the system. Just right to address this problem. Of course, there is no unique or single solution. There is a single solution you can address this problem in a different way and in different countries or different parts of the world, certainly going to address in a different way.
Again, the main point is the consistency of all this, what the FSB, with the input of the IMF, all other institutions, too, is trying to set up is a kind of system of rules that not everybody would certainly follow. That is part of the problem. We are pushing for everybody to follow exactly the same rules, but even if they don't follow exactly the same rules, they have to follow rules which will not be in conflict. That is the point. So, I'm confident that we are pressing enough for this new regulation to take place.
One may consider that it could grow faster. Probably one of the reasons we have been asked to make this report of the state of the art and the situation, but you know, it takes always a long time to set up new standards. It is difficult, really. We are not standards setters here. So, I'm not trying to give explanations for the IMF itself. We just are a part of the FSB, contributing to the FSB, but I can see how difficult it is for the central bankers and some of the centers for accounting, insurance, and others, to do this thing. So it takes time. And, on one hand it is absolutely understandable that the citizens are asking for more, for quicker response. On the other hand, as John just showed to me and reminded me, the Basle, we are working on Basle III now. Basle II took 12 years to be completed. And, now, the FSB is working for a little more than one year. So there is no surprise that it hasn't totally completed their work. Even so we have to start implementing. We are not going to wait for years. That is why we had some differences in what is done in different countries, but if people do listen to the IMF enough, and if they take into account the warning that we are trying to make, they will try to avoid any kind of a real strong inconsistency in what they're doing, with what their neighbors are doing.
QUESTION: I want to know what Nigeria should expect from this meeting. We have a lot of infrastructure problems. Electricity, for instance. Our minister was part of the meeting. What should we expect?
MR. STRAUSS-KAHN: For Nigeria?
QUESTION: Yes. And, what does Africa need to expect from the IMF?
MR. STRAUSS-KAHN: I would answer the second question more than the first, because this kind of meeting is not dedicated to solve the question of one country or another country, especially a country in crisis. Some kind of crisis in Nigeria, but not as strong as the Greek crisis, for instance, so just normal that people are talking, in the corridors, the meeting, about Greece, the Nigerian is a problem like other economies in the world. If Nigeria has specific problems, some specific projects, it is more with the World Bank where the projects are discussed than with the IMF.
Now, when you are talking about Africa as a whole, that becomes a very important question, because I'm just back from a trip of one week in Africa, and it is my third trip in Africa since I'm in this position. And, for us, Africa is really, really one of the most important challenges. We held more than one year ago a big conference in dar es Salaam to take stock of what has happened in past, the good result, bad result; the good things, the bad things, the mistakes; discussions with the authorities, but also discussions with the private sector, and all these discussions ended with a kind of new mandate, a new kind of bonding between the IMF and the African countries. Since then, I think we delivered. At least that is what the Africans are telling me. Not only the leaders, the governments, central bankers, but also the NGOs, the unions, or the business union. I won't argue that everything we're doing is perfect. Of course not. But we change a lot the way we are working with African countries, helping them in coping with the crisis, and as a result, the African countries did cope rather well with the crisis. And just one sign, they're recovering now at the same speed as the rest of the world which wasn't usually the case. After other recessions, African countries did recover with some delay compared to other parts of the world. Not the case this time. And partly, I won't say it is 100 percent, but partly because of the new involvement of the Fund, new kinds of facilities, zero interest loans, that we put in place.
Just have in mind, in 2009 we have lended to Africa four times more than we did in 2008. And, at interest rates which are now zero. It changed a lot. Money is not the whole story, but part of the story.
So, Africa can expect a lot.
Your question was, what can African countries expect from the IMF? The answer is, African countries are right in believing now that they can expect a lot from the IMF.
QUESTION: How are lessons from previous IMF-supported programs influencing the Fund's approach to this Greek situation, and is there a feeling that a larger, front-loaded program might be a better approach rather than giving out money in drips and drabs as in previous cases?
MR. STRAUSS-KAHN: All programs are for us lessons. We learn from all our programs. So the answer to your first part of your question is, of course, all the previous programs in the Fund since 1944 are helping us to build the next program.
And then, to the second question, the answer again will be given when we define the program, because the program has to be adapted to the particular circumstances of the country. And, those circumstances are exactly what we are discussing with the authorities today.
MS. ATKINSON: Thank you all very much. This is the end of the press conference.