Transcript

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

February 9, 2012

Webcast of the press briefing

MR. RICE: Good morning, everyone, and welcome to this regular press briefing from the IMF's External Relations Department. Let me mention a few housekeeping things before turning to your questions this morning. Managing Director Christine Lagarde will be participating in the Eurogroup meeting scheduled to take place in Brussels very shortly today. On February 25 to 26, she will also be participating in the G-20 Ministerial Meeting in Mexico, that will be Mexico City. The First Deputy Managing Director David Lipton will also participate in that preparatory meetings that start on February 24. Details will be provided closer to the date in terms of the Managing Director's press availability around the G-20. Deputy Managing Director Min Zhu, our Financial Counsel José Viñals and our Western Hemisphere Director Nicolás Eyzaguirre will be in Punta del Este, Uruguay, March 1 and 2 for a high-level conference on macroprudential policies to achieve financial stability that will bring together central bankers and senior policymakers from Latin America as well as developed countries to exchange views on how to further strengthen financial institutions globally, and our Media Relations Division will provide more details about that. Our other Deputy Managing Director Nemat Shafik joins Mr. Eyzaguirre and Carlo Cottarelli in a conference in Brasilia on taxation and growth in Latin America, where the topic is how to improve growth prospects and meet countries' social needs through an effective tax system, and again we'll come back to you with the precise date and the details on that. Finally, the Spring Meetings. It's not too early to mention to you that press registration begins on February 15 and we will circulate an advisory closer to the time. With that, let me turn to your questions, and as usual, your affiliation.

SPEAKER: My first question is do you have any comment on the news that Greek leaders accepted the Troika package this morning?

MR. RICE: What I can tell you is that the Managing Director has had a discussion with Prime Minister Papademos and he has informed her that indeed the [Greek Government] coalition partners have come to an agreement on the measures.

SPEAKER: What was the reaction by Madam Lagarde if you can tell us?

MR. RICE: I think the next step is that discussions will continue with the Greek authorities and the European partners on the overall program including as I mentioned in the context of today's Eurogroup meeting.

SPEAKER: Can I have a follow-up about this? Can you clarify what happened yesterday night in Athens regarding the negotiations? What was the sticky point?

MR. RICE: Since it's a negotiation, as you know we don't comment on the details or attempt to give a blow-by-blow on discussions, so I really don't have much detail for you on that except to repeat that discussions are continuing with the Greek authorities and I think we should look ahead now today to the Eurogroup meeting and what comes from that.

SPEAKER: To follow-up on Greece on a couple of points. Just to clarify, it is the IMF's understanding that it is only agreement among the political leaders in Athens and that we have not reached a final agreement among the creditors, the IMF, the private creditors, et cetera.

MR. RICE: That's right. It's our understanding based on what the Prime Minister has told the Managing Director as I said that there's an agreement among the coalition parties in Greece.

SPEAKER: To be clear, since you're saying the next step is that discussions will continue, that means that the agreement presented by Athens has not been agreed in principle by the IMF at this point.

MR. RICE: The way I would put it is that the discussions are continuing now. That's the next step. If you like, an important initial step was to get the agreement among the coalition leaders in Athens and then I think the next step is to continue the discussions on that basis.

SPEAKER: Now that I've got the housekeeping done, just look forward, the IMF is still projecting that Greece while having a recession this year will return to growth next year. I'm absolutely confounded as to how the IMF reaches that understanding given the level of austerity that's required, given the debt that's required, given the unemployment. The unemployment rate overall is at 21 percent, the youth unemployment rate is at 40 percent, the government is cutting down by another 15,000 jobs. I'm wondering if the IMF is concerned about its credibility in putting forth growth when I can't find an economist outside the IMF officially who says that Greece will return to growth next year.

MR. RICE: What I'd like to say on that is that obviously we've been engaging constructively with the Greek authorities and with all the stakeholders. I think there's been progress made and there's been a little bit of an update on that this morning. But more needs to be done and that's what the new program is going to be all about. It has to represent a package of policies that as you say can return Greece to sustainable growth and address the major problems facing the country which I think everyone recognizes on all sides, that's the debt issues, the fiscal issues, the competitiveness issues, with implementation around the necessary reforms remaining key. That's the objective and that will be the premise on which our assumptions are based. It will be a strong implementation of that package. I'd also like to say we're well aware how difficult that's going to be and no one is pretending otherwise. In that process we've been trying to be mindful of the hardship facing the Greek people and to try and minimize the impact on the most vulnerable in particular and ensure that the burden can be fairly distributed including coming back to issues that we've emphasized before including tax reform and ensuring that everyone pays their own way.

Let me take a question online and then come back to the room. The question is "Is there an update on the status of discussions with Egypt?" She's also asking, "Did the IMF meet last week with an Egyptian military delegation in Washington?" On that last question I can say, no, the IMF did not have that meeting. On the broader question of the update on the status of discussions with Egypt, I'll remind that we had some very productive discussions January 18 to 23 on possible elements of an economic program that would safeguard macroeconomic stability during the ongoing transition and create conditions for a recovery and for inclusive growth. In terms of where we stand now, the technical work toward possible IMF assistance is continuing and will continue in the coming weeks as the authorities finalize their program, reach out to garner broad political support in Egypt and mobilize the international financing that is necessary for that.

I'll take one more question online and then I'll come back to the room The question is "Has the IMF received any response from the Argentinian authorities after being given 180 days to improve the quality of inflation and economic growth data?" And she's asking, "What could happen if there is no improvement in that period?" What I would say is that we're in touch with the Argentinian authorities on an ongoing basis and I wouldn't want to speculate on what might happen if there is no improvement, but just to say that will be for the Board to decide when the Managing Director makes her report to the Board which is going to be in September of this year. Perhaps it's best to refer you to the press release on this issue that was published on February 1.

SPEAKER: Gerry, just now you mentioned that on Greece discussions are continuing. Do you have some updates on the second batch of the bailout among the ECB, the IMF and Greece? Secondly, Italian Prime Minister Monti is in D.C. today. Do IMF officials have a plan to meet him or other Italian authorities today or in coming days on economic and debt issues?

MR. RICE: Thank you. What I would say on the financing is what we've been saying for some time, that the key is to restore growth, competiveness and jobs. The key is to help Greece return back to a sustainable debt trajectory. This can be delivered via the right combination of private-sector resources, PSI, and official-sector resources and we don't have a particular view on how that combination of the right level of resources is achieved, but the important thing is that it is achieved and we reach that debt sustainability target which as you know is 120 percent of GDP by 2020. If I could turn to your question on Italy, there are no plans for a meeting between the IMF and Prime Minister Monti during his visit to Washington. As we have said before, we welcome the ambitious frontloaded fiscal consolidation measures that have been announced to reduce Italy's deficit and place the debt on a downward path and we estimate that that consolidation will balance the budget in structural terms [by 2013].

SPEAKER: To go back to Greece, could you say how much contraction you expect for Greece this year? How do you view the economic situation in 2012? And to go back to the second loan package, what is the IMF's experience on this? Do you intend to shoulder about a third like the Europeans were expecting or do you want to take less on this time?

MR. RICE: On the economic outlook for Greece, along the lines that I was discussing earlier, I think everything depends on the program and the agreement on the program, and then everything depends on the implementation of that program. So I'd prefer to wait until we have more to say on that and then to give you something a bit more precise on our assumptions on the outlook. Your second question was on?

SPEAKER: The share.

MR. RICE: Again I think we have to wait and see what the overall financing package is going to look like, the discussions on the combination of PSI, OSI, that's private-sector or official-sector financing, that's necessary to meet the goals I just mentioned. And then there will be a discussion, an assessment by the IMF of what's required and of course a discussion with our Executive Board where a decision will be made on the level of participation of the IMF and its level of financing.

SPEAKER: Gerry, I asked this question before and I will ask the same question again today because it is very important. What is the position of the IMF on the thirteenth and fourteenth salaries?

MR. RICE: You know and I think we all know again what the goals are here. It's competitiveness, it's growth, it's jobs, it's the sustainable path and returning to that. I think we all agree and I think everyone agrees that a major element of reaching those objectives is reform of the labor market. People can disagree on what the particular elements of those reforms might be and that's the discussion that's ongoing, different approach to doing it and different proposals, different options in the process of the negotiations. I won't go into the details. But again I think we all agree that there needs to be this labor market reform and the adjustment of wages to align more with productivity. Again, I think there’s broad agreement that that needs to be achieved. The question of how we get there is something that’s still under discussion.

SPEAKER: So is it fair to say that the IMF wants to cut these two salaries?

MR. RICE: Again, I’m not going to get into specific negotiating positions or proposals. What I would just refer again back to is what we’re trying to achieve and to have a discussion and an agreement with the Greek authorities on the best way to get there. SPEAKER: On Greece again, is there a set of preconditions that even if a second loan package is -- the terms of which are agreed in the next several days, is there a list of measures that Athens must implement before the IMF even agrees to a second bailout loan, including implementation of the terms of the previous agreement?

And then secondly, does the IMF have a philosophical perspective on its Greece program that extends outside the individual country itself? I mean by this, is the IMF enforcing such strong austerity measures on a country not purely for -- not solely in the sake of the country’s interest? Some might argue it’s not in the country’s interest, but it’s rather to save the eurozone project and to prevent a larger global situation. Do you understand the nature of my question?

MR. RICE: I think I do. Thanks for that. To answer your first question, it’s very likely there will be a set of what we call prior actions in the program of things that need to be done before we go ahead. I’d also like to just say that’s not something that’s particular to Greece. This is a common feature of many of our programs’ prior actions, so it’s not that Greece is being singled out here for prior actions.

On your broader philosophical question, I always hesitate to get philosophical and will try not to too much. First thing I would say is the IMF is not imposing austerity on Greece. I think what we’re trying to do here is come up with a program that will return Greece to a sustainable path. Everybody knows the deep-rooted challenges that Greece faces, and we, the IMF along with our partners in Europe -- the European Economic Commission, the European Central Bank -- are partnering, joining with Greece to try and do that, to try and achieve that objective.

As I said earlier, it’s tough. It’s difficult given the nature of those deep-rooted problems. And I think everyone recognizes that there are difficult things that need to be done in terms of labor market reforms, product and service market reforms, and I won’t try and go into details here. There are difficult things to be done on the fiscal side. As I said, it’s a package of things that need to be done. They are difficult things that need to be done. The program at the end of the day is Greece’s program. So again, I don’t agree about the imposed word.

And I would just again reiterate, we have been mindful from the outset of the hardships that this would entail for the people of Greece, and we have sought in these negotiations and in the program to come to an understanding with the Greek authorities that there are ways that the most vulnerable groups can be protected -- for example, protecting those at the lowest ends of wages -- and we have been trying to ensure that the adjustment, difficult as it is, is carried out in a way that’s fair so that the burden can be shared.

SPEAKER: I think that the real question here is if Greece can implement the new program, given that Greece failed to implement their old program, which as you know, as everybody knows, was easier than this one.

MR. RICE: There was an interview recently in the Greek press by our Mission Chief [For Greece, Mr Poul Thomsen] where he pointed out that this kind of blanket criticism of Greece, that Greece has done nothing and that nothing has been achieved, is fundamentally wrong. It’s a big misperception, and I think it’s unfair. I think Greece over the last several years has taken significant steps forward in a number of areas, and you talk about the fiscal area and others. That said, more needs to be done, and that’s what the successive program is going to be about, about building on what has been done and addressing what needs to be done going forward. And that’s kind of the way I’d describe it.

I mean, it is not uncommon when circumstances change that our programs change, too. And I think we can all understand that; that’s common sense. And I think if you look at, the IMF and our involvement in different countries, you’ll see that over time programs change. Again, it is not uncommon to have successive programs in different countries, so this is not unusual just to Greece I guess is what I’m trying to say.

SPEAKER: How is the IMF assessing and does it intend to manage the risk that new elections in Athens in April might undo or dramatically change the agreements that have been reached in the coalition government?

And then secondly, two other things: Hungary, an update on status of talks there. I understand IMF is assessing Hungary’s growth. And comment on the ECB’s keeping rates at 1 percent.

MR. RICE: What I would say is that as in all our programs, broad political support for the program is crucial. And that’s why we, the IMF together with our partners in Europe, have been taking this time to discuss the measures of a possible new program with the political leaders in Greece. We will seek assurances as we often do that whatever changes to economic policies after elections that those policies will remain consistent with the objectives of the program. And again, that’s not something that’s just unique to Greece. It’s a common feature in a number of our programs.

On Hungary, what I can tell you is that as the Managing Director said last month, before we can determine when and whether to start negotiations, we will need to see tangible steps that show the authorities’ strong commitment to engage on all the policy issues that are relevant to microeconomic stability. And the support of the European authorities and institutions will also be critical for successful discussions of a new program.

SPEAKER: Just on Hungary, are you saying that the IMF does not have any technical analysis going on in Hungary of the economic situation?

MR. RICE: We’re always assessing and looking at what’s happening in our member countries, but I won’t go beyond what I’ve just said.

On the ECB question, I think what we can say is that with decreasing inflationary pressures and what remains an intensified negative outlook for the euro area, we continue to see scope for further easing of monetary policy. And given the persistent market tensions, the ECB should not hesitate to use unconventional monetary policies to secure orderly financial markets as they have been doing in recent days.

SPEAKER: One follow-up, please. On the assurances by the Greek parties, are you going to seek and ensure the assurances for the Greek parties?

MR. RICE: As I said, there are a number of ways that we can seek assurances and ensure that we have them, so I won’t go into the details of how we do that. The important thing is that we have the broad political ownership and that we have the assurance.

SPEAKER: Would it be beneficial for Greece if the current government extended its terms in order to implement the new measures?

MR. RICE: Again, I think we’re heading into areas where the discussions are continuing, negotiations are continuing. And I think we should allow those discussions to take place, including the important meeting in Brussels today, and then perhaps we can come back to some of those questions.

I’m going to take one more question from the Internet, and then I’m going to wrap. And the question is, “What are your recommendations for Latin America and particularly Dominican Republic given the worsening of the crisis?” I think as the Managing Director has been emphasizing in recent weeks and also one of the major messages of the recent World Economic Outlook and our other flagship publications, we see the crisis in Europe as potentially having implications all around the world, including in Latin America. And I would point you to some recent statements and, in fact, a blog of it was published by the Director of our Western Hemisphere Department, Nicolas Eyzaguirre, just a few days ago. Without going into the details, what he was advocating and advising was that Latin America needed obviously to continue with its reforms in the face of the crisis. That includes strengthening the fiscal buffers, easing monetary policy, and maintaining flexible exchange rates. I think it’s best probably to point you to that blog.

SPEAKER: Is it true that you have a new report on Greece and that this report is not positive?

MR. RICE: Again, I’m not going to comment on new reports that may be or may not be being produced for the discussions that are ongoing. We’re still in a negotiating phase, and I don’t have anything for you on that.

I’ll take your question since you didn’t get one.

SPEAKER: Thank you. Is there any possibility you can talk a little bit about Southeastern Europe, Western Balkans countries, I mean from Croatia to Albania, Macedonia, Bosnia, Serbia, that part, Montenegro? Any particular problems with those countries and how the IMF sees the impact from the eurozone crisis to other countries? And also if you have any information about Bosnia particularly because Bosnia and Herzegovina doesn’t have a budget even for 2011, not even talking about 2012. They don’t have anything financially speaking. Thank you.

MR. RICE: Thank you. We’ll come back to you on Bosnia separately. I don’t have anything for you right now.

On the issue of Southeastern Europe, I would refer you again to the recent, just two weeks ago, World Economic Outlook and those other publications which I think talked about implications of the crisis in Europe for different parts of the world, including Southeastern Europe, Eastern Europe. I think we would say that it’s fairly obvious that should the situation in the eurozone continue to deteriorate, it would have a particularly negative effect for those countries that are close by and dependent on the eurozone, closely linked in terms of trade and financial sector employment and so on. So I think the implications would be very serious were the situation in the eurozone continue to deteriorate, which, of course, is what we’re all working to avoid.

I’m going to leave it there and look forward to seeing you all again in two weeks time if not before. Thanks very much.