Transcript of the Press Briefing on the International Monetary and Financial Committee by the IMFC Chairman and the Internatioanl Monetary Fund Managing Director
October 10, 2010
Press Briefing on the International Monetary and Financial Committee by the IMFC Chairman and the Internatioanl Monetary Fund Managing Director
Saturday, October 09, 2010
Dr. Youssef Boutros-Ghali,
Mr. Dominique Strauss-Kahn,
Mr. John Lipsky,
Ms. Caroline Atkinson,
|Webcast of the press conference|
Ms. Atkinson: Welcome to the closing press conference from the IMFC, just closing that meeting. Of course, the rest of the annual meetings will continue for awhile.
We will have a brief opening remark from the Chairman of the IMFC, Youssef Boutros-Ghali, followed by the Managing Director of the IMF, Dominique Strauss-Kahn, and then open for questions.
Mr. Boutros-Ghali: Thank you, Caroline.
Good evening ladies and gentlemen. We just concluded the 22nd meeting of the IMFC. As you know, this is the policy-making body of the IMF. You will probably have the communiqué in your hands. We discussed a number of issues, chief among them the global economy and the global recovery. We analyzed a number of dimensions in that. We came to the conclusion that the global recovery is happening, but it is fragile. It is uneven around the world. It is still threatened by a number of elements that could push on the downside. Some elements related to sovereign risk, others related to financial sector which is still recovering, which is not fully recovered.
We have also examined the continuing work on financial sector reform, done by the FSB and a number of other bodies. We welcomed, of course, Basle III reforms. And, we are keeping coordinated with the regulatory reforms so that they keep up with the policy and structural reforms in the economy.
Low-income countries have recovered. Some reasonably well. Nevertheless, poverty rates are still a concern among the membership, and we are making sure that the instruments that we have established within the IMF are able to help these countries when they need assistance.
We have gone extensively into the reforms of the institution, of the IMF. The reforms regarding quotas, governance, with all its components, the composition of the Executive Board, the size of the Executive Board, and a number of these elements. There has been significant progress. All of the parties involved are converging toward a package that we think will move the institution to a new plane, make it more adaptable and more able to deal with problems now that have become multilateral in most of the features and have become very pressing.
We have also looked at what is happening in the world economy. There are structural changes that need to be implemented, a rebalancing between surplus countries and deficit countries. There are frictions, obviously. You have read in the press there are a number of points of friction. These are being addressed. The institution we have come all to the conclusion that the IMF is the place to deal with these issues, exchange rate and others. They are being addressed in a multilateral fashion, in a systematic fashion. The reforms we're instituting will make this a permanent feature of the institution, multilateral surveillance, and establishing the instruments and the tools with which the institution can address such problems, and make recommendations that are of a multilateral nature.
Again, we have looked at the lending facilities. They have been instituted, as you know, in the last year or so. They have been very effective. They stand ready to assist any country should it need assistance. Issues of surveillance and mandate of the Fund have come to the forefront, because of the structural changes we are seeing in the world economy. These structural changes have to be analyzed, they have to be drafted, and they have to be managed. The natural institution to do that is the IMF. And, the reforms that we are instituting are going to make this institution better able to deal with challenges that didn't use to come up previously.
Thank you very much.
Mr. Strauss-Kahn: I have very little to add. To describe a little the flavor of the atmosphere, I think the IMFC breakfast this morning was very effective. You know that is something we have been doing now for two years or so, when in an informal way, more than 40 people gather, and the fact that it is informal is making it possible to have real discussions. I think it was very useful, mostly on this idea that because the recovery was so uneven and because it creates differences in interest rates, triggering capital flows, which in turn trigger some reaction and problems that can create in the international monetary system, we needed to find a more cooperative way to deal with this. I think that is a very interesting step forward.
At the same time, the spillover report that I had in a few words presented to you six months ago when the idea was floated, and which has been worked out more precisely defined since then, are now in the process of experimenting with a large set of countries having systemic implications and I think that is the right tool for the IMF to address the question of systemic stability. The idea, you know, is that usually the surveillance process goes once through bilateral surveillance, but with very little attention or no attention at all paid to the consequences of economic policy implemented in one country, on other countries. For instance, it is clear that in systemic countries like the U.S., like the euro zone, like Japan, like China, what they do for their own countries have consequence on the rest of the world, so the need to have the spillover report has been discussed for months and I think it is now part of our toolbox, and I expect from them a very important result.
It will be part of the Article IV, and I will myself attend the conclusion of the Article IV for those major players, to show the interest we have in them and try to make this consistent.
From this point of view, along with the in-depth study we are going to make on how to manage in the short term the problems created by the capital flows, I think that an interesting step forward has been made broadly on this questions of the international monetary system.
Another question is the one that the chairman addressed, which is the mandate on governance. On the governance question, which I have seen make many headlines, as you know, we're still not there, but we're not to far, both on the quota question and the chair question.
Broadly five questions at stake.
One is the size of the quota increase; second is the shift; third is the question of the Board; fourth is the ministerial engagement in the IMFC; and fifth, the selection of the Managing Director, the process.
On all this, I think an agreement will be found in the coming, say, weeks, maybe days. Maybe weeks. But, not done. Because still there are some diverging views, but I'm now used to this. We already had a change in quota in 2008, and before we completed the review, still they were diverging then as they are diverging this time.
I think we are on the right track.
Ms. Atkinson: We'll open up to your questions. Please raise your hand and when you get, there will be micro phones coming and please identify yourselves and your news organization.
Question: To the Managing Director, in the first press conference you described your systemic stability initiative and you just talked now about boosting surveillance. Is that what you meant, or are you looking for something broader?
Mr. Strauss-Kahn: I don't see exactly why we have so much noise about this story. We need to boost our initiative on systemic surveillance, and we're going to do it. There are different ways to do it, including what I just said about the spillover reports. The fact that I want to attend personally to the Article IV conclusion of all these four or five big partners. And, other tools.
We have to take many initiatives in this field. So, it's not something new. We have to take an initiative for several months but, of course, the fact that during this last week there has been more noise about currencies means that we have to speed up and implement things. But, it is just the normal business in which we are involved for months, which is to enhance the surveillance.
Question: After a period of such sustained attention on currency and exchange rate disputes and the prospect of these disputes growing, are you disappointed, Mr. Strauss-Kahn, that the most the committee could agree upon was to work toward a more balanced pattern of global growth, recognizing the responsibilities of surplus and deficit countries? Some people will think that language is too ineffective.
Mr. Strauss-Kahn: The language is ineffective. The language is not going to change things. Policy has to be adapted. So the question is not to change the language. The question is by more coordinated policy to make the reality change. And, this question is the question of -- well, there are two questions. The first question, the one you mentioned, which is the long-term structural question of rebalancing global growth, and there is no way to believe that global growth could be rebalanced without changing some currency value, because it is clear that we don't have high growth in one part of the world, and low growth in another part of the world. The rebalancing goes also through the revaluation of the part of the world where you have high growth.
The other question is a more short-term one, which is, has been a bit triggered by the declaration by Mr. Mantega on the currency war, which was probably too strong a word. But, fine. Some emerging countries, as a reality are facing large capital inflows. And they need to find way to react to this. That is more the surface of the question. The deep waves are on rebalancing growth. Both have to be addressed.
I'm not disappointed. The problem is that we can talk and talk about that. What we need is real action, and I don't believe that this action can be done in another way, in a noncooperative way. That is why the MAP framework is so important. That is why the discussion that is going to take place in the G-20 are so important, and ongoing discussion in this institution, multilateral institution is made to make it possible for the membership to discuss the different questions at stake, that is exactly what we are facing.
Mr. Boutros-Ghali: If I may add, also, the members of the IMFC recognized all of them recognized explicitly that the solution to this issue is going to have to be cooperative. And, one of the things that they emphasized in the reforms of the institution, whether surveillance or mandate, is to allow the institution to be the center for resolving these kinds of issues. So they're very much aware that it is a cooperative solution.
Question: Mr. Strauss-Kahn, you just said within days or weeks, the reform on quotas and chairs, and also the process of selecting the Managing Director could be resolved. I am just wondering what are the remaining obstacles to achieve that goal? If it can be done in weeks, why not now?
Mr. Strauss-Kahn: There is only one obstacle which is the agreement over the members. We're going to get it. It's a joke.
A long list of topics, but balanced. A large part of the gap has been bridged, but still a long list of questions on which the members want to discuss. Again, I think that of all this laundry list a solution will be provided in the coming -- I don't know if I should say days or weeks, but let's say a small number of weeks.
Question: Another quota question for Mr. Strauss-Kahn. So, we know that during the meeting there is a new argument, some countries suggest that we should link the quota reform with currency, exchange rate change. Do you agree that a quota reform should come at the expense of currency, exchange rate change?
Also, can you tell us if such an idea is still being discussed in the coming weeks during your future discussions?
Mr. Strauss-Kahn: I haven't had anybody saying that a condition for the quota reform to take place is what, I don't know, would happen on the currency side. But what I have heard, which makes sense, is that when countries want to have bigger quota, have more say, more voice, more influence in the IMF, then they must also share the problem of the whole. You cannot be in the center and be a free rider. The more you are at the center, the more you need to take your part in stabilizing the whole system. One doesn't have to be linked to the other one. It is the logic that the biggest members of the institution, let's say, the six, the 12 biggest members of the institution are the ones on which relies the stability of the system, and so the more countries want to be high on this ranking the more they have responsibility toward the rest of the global economy. It is not a technical link, or a blackmail, as hinted at a little, just the logic of an institution where you have some members having more weight than others.
Question: Mr. Strauss-Kahn, you mentioned that you are going to participate in these Article IV consultations. Will you describe the role you envisage is it the role of an arbiter, the role of a judge, the role of an analyst? Could you describe your role in that?
Mr. Strauss-Kahn: You perfectly described it. It is all of that.
I already participated, as is the tradition, at the conclusion of the Article IV with the United States. It's a tradition, and I followed it. I think it would be important, and not only that, and I started last year to participate also in the conclusion of the Article IV for the euro zone. But, I think it is not enough. And I think that what my take-away from the participation is that it was useful to have this occasion of a direct discussion with the members, and so I'm going to extend this to the most important members.
I think it is part of this new initiative that I think are useful for the systemic stability, which is to have more discussion, sometimes multilateral, sometimes bilateral, and if it has to be bilateral, but finally, used in a multilateral context, has to be done by the IMF.
Question: A question on Greece. Thankfully we're not in the center these days.
You have repeatedly said that the Greek government is on the right track as far as consolidation and other measures are concerned. But you have also said that you need growth. And Greece has no growth. I am wondering how Greece can achieve growth in a world economy that you just said has anemic or uneven growth rates.
Mr. Strauss-Kahn: First, I have repeatedly said that Greece is on track and I think what is going to be achieved by the Greek government, and even more by the Greek people, is really amazing. The whole population has realized they are at the edge of the cliff and they need to manage, and they are doing it. It is a very good example given to all the countries having problems, that a nation is likely, when it is needed, to do the efforts which put them back on track.
Of course, growth is necessary, and the program put Greece back on track with growth, but later on. As you rightly say, if the environment, especially European environment, is not very positive, it won't help. That is absolutely true. That is why we're trying to push, not only the reason, but it is consistent with the fact that we are trying to push the Europeans, the countries, those having some fiscal room, to do more on growth, having in mind that some others have no fiscal room at all, and may be not exactly in the case of Greece but a difficult situation, and for those they need to focus on fiscal consolidation.
I don't know if we said a few words about that in the opening press conference, but I have often seen this last week that the message of the IMF was sometimes difficult to understand because sometimes we say you should push, sometimes we say you should take care to consolidate. So is it stimulate or is it consolidate? What it is, consolidate as much as you have to, and stimulate as much as you can. And, of course, it is country-specific. So, depending on which country we're talking about, we don't have exactly the same message. In Europe there is probably some room for higher support to growth, and it would be helpful for everybody, including for Greece.
Question: The United States and China keep trading accusations regarding the currency, and of course both have their points. And, of course anything that should be done, should be done in a cooperative way. But, isn't there a risk of just following a broken record and keep saying again and again and again?
What has to be done now and what and by whom, and what can we expect for the G-20 meeting in a month?
Mr. Strauss-Kahn: I don't want to raise expectations for the G-20. What I want to explain is that the discussion which takes place, not only between China and the U.S., but with other partners, is the very important one and I think that we are now arriving at the moment where the people are discussing the right stuff, and discussing the right stuff is not that of a declaration on the exchange rate.
The real problem, as we said before, is the rebalancing question. And, the move in the exchange rate will be more a consequence of the rebalancing than the contrary. So, I think what everybody understands is this, and there is no way for the global economy to be more stable, to achieve growth everywhere if it is not done in a cooperative way. Again, that is the message from the framework that we are going to provide for the G-20, and I think it is more and more understood by the different capitals and the authorities, so what I expect is that the progress of this idea will be strong enough to avoid conflicting situation, and try to take into account the argument of the different parts to find a win-win situation which exists, which is described in this framework. A win-win situation in which everybody is better off, rather than trying to find a domestic solution to global problems and which, as we know, doesn't work.
Mr. Boutros-Ghali: The gist of the meetings this time, the people were aware that the problems we are going to be facing, we're facing now, and problems we'll be facing in the coming months, need cooperative solutions. They need people to talk to each other and to come up with plans that are agreed among many sides. The IMF is being reformed with that in mind. So that when surveillance happens, it happens multilaterally. When policies are designed, they are designed multilaterally. You said it yourself. Any policy in one country affects many others. And therefore, from now on, as the economy becomes more integrated, the surveillance and the mandate of the institution has to be more integrated around the world.
Mr. Strauss-Kahn: I will add one point. I agree with what Youssef said about this, the idea that cooperation is needed comes back. I have been insisting a lot on the possible vanishing commitment to cooperation after the strong cooperation in London and in Pittsburgh and the idea that maybe because of people having in mind that the crisis is over, this spirit of cooperation should decrease. What I realized during this annual meeting is, I don't know if I was wrong, or things have changed, but obviously all the ministers agree with this idea that the Fund is right, it is right, and even if we're not any more at the climax of the crisis, where cooperation was obviously necessary for everybody, even in more quiet times, which is not so quiet, but not as difficult as they were one year ago, they need to go ahead with cooperation, because the economy is a globalized economy and they can't find a way for a solution. And even those being very vocal on the question of capital inflows, the need for capital controls, intervention on the market, so on, they say that, and then they say, okay, now turning to the IMF, what can we do? Because everybody realizes there is no single solution that you can apply in your country without having a plan at the global level. That is why cooperation is certainly one of the poles of the meeting, and the other one is clearly the role of the IMF. And really I'm proud of that. I didn't hear anybody saying anything to the contrary. They are saying, "Fine, the right place to do things is in the IMF."
Ms. Atkinson: Thank you very much. I know there are more questions. There is another press conference later on at the end of the Development Committee. Thank you very much.