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

Washington, D.C.
Thursday, June 14, 2012
Webcast of the press briefing Webcast

MR. RICE: Well, good morning everyone and welcome to this press briefing on behalf of the IMF. I am Gerry Rice of the External Relations Department. And as usual this briefing with be under embargo until 10:30 a.m., that's Washington time.

Let me begin with a few events and upcoming travels for the management of the Fund and then we'll turn to your questions here in the room and to our friends online. So let me begin with the Managing Director Christine Lagarde and tell you that this upcoming weekend, early next week, June 17 to 19 she will be in Los Cabos, Mexico for the G20 Summit and related events, including meetings with business leaders and labor leaders ahead of the Summit. We will most likely hold a press conference at the end of the G20 so that should be on Tuesday, June 19 and we'll come back to you with more precise details on that.

Ahead of the Summit on June 17th, the managing director will participate in a panel discussion on the global economy, organized by business leaders--the so called B20. She will leave directly from Mexico to head for Rio and the Rio+20 Environmental Summit, which is from June 20 through June 22nd, before she returns then to Washington.

A little bit further ahead the managing director will be traveling to Asia--to Japan, Indonesia and Thailand in early July. More specifically, on Friday, July 6th, Madame Lagarde will be visiting Tokyo to meet with the senior officials and she will give a key note speech at the Nikkei Special Forum and hold a press conference later that day. And then following day, that Saturday, July 7th, she will participate in a town hall meeting with students at Keio University in Tokyo. And of course all of this is part of the prelude to the Annual Meetings that will take place in Japan later this year.

Following Tokyo, Madame Lagarde will visit Indonesia. She'll be in Jakarta July 8 to 10 and then she will be in Thailand in Bangkok July 11 to 12. And we'll be able to give you more details on this in due course.

Finally, the First Deputy Managing Director David Lipton will also be in Los Cabos, Mexico early next week and later next week David will be visiting Saint Petersburg, Russia for the Saint Petersburg International Economic Forum. And with that, let me turn to your questions in the room.

QUESTION: I know that you're not going to comment on the elections and I understand, but some Greek political parties are against restrictions, are against the program and as you know this party is asking the IMF and the Troika to leave Greece after the elections if they win. What is your reaction to these cases?

MR. RICE: Well, I think, you know, we need to take this one step at a time. As you say, Greece is having elections this weekend. I think we should respect the democratic process in Greece and once there is a government the IMF will engage in a dialogue with the new government.

QUESTION: Can you explain to us the case of Hungary, if I remember, what happened when the Prime Minister of Hungary after his election short ran the mission? How did the IMF react then?

MR. RICE: You're right that Hungary decided at one point not to draw upon the Fund's resources under the program. And it's not unprecedented for that to happen.

QUESTION: What happens to that? I mean, the mission went to Hungary? You stop the mission.

MR. RICE: Well, Hungary, as I mentioned, stopped drawing on the program. The program eventually expired. I think that was around October 2010 and, you know, since then you also may know the Hungarian authorities have requested further assistance from the Fund and we're in touch with the Hungarian authorities having broad discussions with them.

QUESTION: Is the IMF open to renegotiating the Greece Program after the election? Number two, was wondering with contagion now moving, well, borrowing costs are soaring in Spain and it looks like new contagion to Italy, what kinds of things does the IMF want to see from the G-20 to stabilize the situation?

MR. RICE: Well, on Greece, I don't have much to say beyond what I've just said, which is that I think we need to just take this one step at a time. Respect the election. Respect the democratic process and we will engage with the new government in Greece once that process is complete.

In terms of the G-20 and, what we might expect this weekend, I think it's always healthy that the global leaders come together and discuss the key global economic issues. We can expect that they would focus on issues of growth and issues of jobs and employment. As you suggest, I think the Eurozone debt crisis will be an important topic and the steps being taken to address the crisis. I would imagine that there will be discussion on progress being made, steps being taken by various countries under what has been called the Mutual Assessment Process, which looks at how countries are different, are implementing their various policies and we would also expect there to be some discussion relating to the IMF on issues of boosting the Funds resources and on the issue of quota reform.

MR. TALLEY: The IMF said that it expected I believe at the G20 for the BRICS nations to outline their specific commitments on resource -- Fund resources. Is the Fund expecting that those commitments will be detailed at the G20? And there's been some concern that the government's reform, not only the 2010 quota ratification, but also the quota formula calculations are being delayed. Is that an accurate assessment? I'll follow up with something else.

MR. RICE: On the resources issue, and just as a reminder, at the spring meetings there were commitments made by the membership for more than $430 billion to boost the Funds resources. I think what we would expect in Los Cabos is further update on that, for leaders to discuss the status of where those commitments are. Hopefully a firming up of commitments would be part of that discussion.

On the quota again, for everyone, you may have seen our press release yesterday where the Fund continues to call for as much progress as possible, as quickly as possible on the 2010 reform. And again, I imagine that will be a point of discussion in Los Cabos. On your question on the quota formula. Yes, discussions are underway on the quota formula and I think the time table for that remains as it has been, which is we expect that to be completed in January of next year.

QUESTION: Just to follow-up, if I may. So you're hoping for a firming up of commitments. There was a clear expectation at the spring meetings that at the G-20, the members would ratify their decisions. This sounds like there's a little bit of back tracking or delay on those funding resource commitments. And secondly, does it really matter? I mean, why would not having a few extra billion in the Fund's kitty really matter at this point in time if at all?

MR. RICE: Well, thanks. On your first question, just to be very clear, there has been no back tracking or delay. I think there has been good progress made since the spring meetings and leading up to this meeting in Los Cabos. Discussions have continued with the various donors and it was never expected that the package would be completed with every detail fixed by this time. So, progress has continued. And clearly the G-20 and other global leaders, in fact, the IMF membership as a whole, feel that the strengthening of the global firewall via the boosting of IMF resources is in fact an important part of the actions that need to be taken given the current crisis that the world is facing.

QUESTION: I would like to know why did IMF bring forward the financial report last Friday. And I also would like to know what was the role played by the managing director in the Euro Group Conference on last Saturday also on Spain and the reputation of the banks?

MR. RICE: Well, we like to issue these reports is as timely a way as possible. The board discussion took place last Friday. And we issued the FSAP--the Financial Sectors Assessment Program as soon as the discussion was completed.

In terms of the Managing Directors role, she was indeed, as you say, a party to the teleconference that took place over the weekend and as you could from the outcome in terms of the statement from the Euro Group, the IMF is indeed being asked to play a role in terms of the monitoring and reporting on the financial assistance.

QUESTION: Just to follow-up, what will be the conditions from IMF in this Spanish package? Are there clear, are they weak, or are they still working on them?

MR. RICE: Well, just again, a reminder that there's no IMF financial assistance in this package. There was no request for IMF financial assistance. In terms of the modalities around the monitoring, those are still being discussed with the Euro Group and with the Spanish authorities. So I don't have the details there for you. Let me also just mention as part of the context that there is an IMF mission in Spain right now as part of the annual assessment of the Spanish economy. We refer to it as our Article 4 Consultation. It's the annual assessment. We expect that mission to complete its work tomorrow and we expect a reporting on its findings then.

QUESTION: Could it be, just another follow-up, could it be that you bring forward also the Article 4 assessment, or report?

MR. RICE: Well, as I said, we expect a report on its findings when it concludes tomorrow.

QUESTION: I just wanted to follow-up on Spain. So I know it's still being discussed, but is there anything in the Fund's history where you had to monitor something where you were not financially involved? Because what's not clear is, is the money going to be disbursed all at once and then do you -- what's the point of monitoring something that's already been disbursed, or this the spirit to every quarter there would be an installment like for a loan?

I have also a second question regarding Cyprus. There's increased concern about their banking situation. Do you -- are you monitoring Cyprus closely? Have you received any request for help? And that's it for now.

MR. RICE: Well, again on the modalities of monitoring, I really don't have much to add beyond what I've said. It's under discussion. In terms of IMF monitoring and reporting, we have arrangements with many countries on an ongoing basis where we monitor and assess the economies more broadly without having financial support.

QUESTION: But there's no money involved in these cases?

MR. RICE: That's right. But as I say, in this particular case I don't have the details of the modalities. They're still under discussion so we're going to have to wait for that.

QUESTION: But that means it's correct to say you've never done anything like this before, like, monitoring somebody else's money

MR. RICE: I don't have the 65-year history in my head, but maybe we can come back to you on that. On Cyprus I can tell you that there has been no request for financial support from the IMF.

QUESTION: I have a follow-up on Cyprus, if I may. Is it true the Cypriots ask the IMF to postpone its mission to Cyprus?

MR. RICE: No, I have no information to that effect.

MR. RICE: Let me just go online a bit and take a few questions here and then I'll come inside the room.

There is a question on Spain: Saturday's bailout of Spain has not calmed the financial markets with the Spanish bond over seven percent, is another bigger bailout needed? And could Spain be under an IMF program?

We believe, as the managing director said in her statement over the weekend, that Spain took the right step when deciding to secure a back stop for its financial sector. The scale of the financing gives assurance that the financing needs for the Spanish banks will be fully met. It's also important at the same time of course that the reform program that the Spanish government has undertaken continues to be implemented, as they are doing. And there has been no request for IMF financial assistance, nor are there any plans at the IMF for such assistance.

There's another question on Spain: does the IMF support use of ESM funds to recapitalize European banks? Are ESM funds sufficient to recapitalize the banks? Is there any consideration of using IMF funds to bolster the size of the ESM for Euro-wide bank recapitalization?

To repeat, we think that the decision Spain has taken to see assistance for the financial sector is the right step. Spain has used the instruments available -- currently available to it from the European partners. We have also said in the past that we think it would be desirable for a further strengthening of the European crisis management instruments, including a Pan-Euro facility that can take direct stakes in banks. And we welcome the discussions under way in Europe along those lines.

Let me take one more online. The question is: what does the IMF expect to achieve in terms of coordinated international efforts to help speed up the IMF's quota and governance reform and bolster its lending capacity at the upcoming G20 Summit.

And I guess there I can reiterate a little bit what I said earlier that on the resources side we expect the leaders to discuss the status of commitments to boost the IMF's lending capacity and firming up of commitments. And on the quotas, again we expect progress made toward the implementation of the 2010 quarter reforms.

QUESTION: Just to follow-up, you mentioned again -- reiterated the IMF view that you wish that the European bailout funds would be able to take direct stakes in banks. And obviously one of the reactions to the Spanish loan is that it's going through Madrid and adds to the potential debt burden that's why yields are going up. Can you elaborate on given those two points exactly why the IMF -- what at risk for directing the loans through Madrid, rather than into the Spanish banks?

Secondly, is there any consideration or dialogue about using IMF funds, either existing funds or the additional funds to giving that to, or loaning that to a Pan-European -- the Pan-European bailout mechanism. And finally, Secretary Geithner yesterday said that Europe needs to implement -- or at least agree to implement a banking -- a European banking union, spur growth with a number of policies and to strengthen the bailout. And if they don't do it in the next couple of weeks at the two Euro Summits, he indicated that there won't be an opportunity for a fifth crisis escalation response. Basically saying, you know, three strikes and you're out. Does IMF agree with that warning? That if Europe doesn’t take those measures in the next several weeks that basically times up? The bell rings and Europe turns back into a pumpkin?

MR. RICE: A few questions there thank you. Just to be clear, no discussion of IMF funds for Pan-European facility. And maybe just linking up your first and your third question, the IMF has called for some time for a strengthening of the Europe-wide crisis management instruments and indeed for a strengthening of the Eurozone architecture. I think we have been clear, and as recently as Tuesday when the Managing Director spoke here in Washington, that we continue to believe there's a need for a comprehensive action to be taken. And we believe that that need is urgent.

QUESTION: I understand, but some economists say that we're on the verge of catastrophic financial problems. And IMF is not -- you clearly right there in your response did not give any sort of timeline. So to for all intents and purposes, the market's looking to the IMF, which is supposed to be the world's economic advisory board in some of its capacity, is saying, well, Europe has -- it's urgent, but urgent could be two weeks. It could be two years. There's no timeline that IMF is giving to the markets or even to Europe about the, you know, the time that Europe needs to act.

Secondly, if you could and I appreciate you allowing me to ask you these questions, could you please tell me why IMF believes that Europe needs to invest directly into the banks and not pass its bailout funds through the government as it is currently proposed?

MR. RICE: Well, this issue of a specific timelines, which I don’t have for you unfortunately. But I think you have seen, recent statements to speeches, major statements from the Managing Director, amongst other things within the past week where she has laid out fairly clearly what the IMF feels needs to be done. And the sense of urgency surrounding that. So, beyond that I really don't have much for you. And I also don't have much beyond what I said about the IMF has called for a strengthening of the Pan-Euro crisis management instruments, including we said we think it would be desirable to have a Pan-Euro facility that would take a direct stakes in the banks and we welcome the discussions underway to that effect.

I'm going to take one online. It's a change of subject to Pakistan. The question is: please let me know whether the IMF has approved a new program for Pakistan?

And to that I can say there has been no request for a new program from Pakistan. The Fund however, remains closely engaged with Pakistan, including in the context of the upcoming post program monitoring discussions.

QUESTION: what is the likelihood of the IMF getting the full 430 in resources at this meeting? We know that leaders don't quibble about formulas and quota formulas and things like that. They will want to look at a bigger picture scenario. So what do you think is the likelihood of the IMF getting that money.

Second, when the IMF goes into the G20 usually you have a take on the current state of the world economy, could you -- what is that take as we go into these meetings please?

MR. RICE: On the resources, I'm not in a position to predict or preempt what the leaders might decide, but just to repeat that there were commitments made to actually more than $430 billion at the spring meetings. We expect that issue to be on the table in Los Cabos. There has been good progress made in the run up to Los Cabos in terms of our discussions with bilateral contributors and we're looking forward to further progress at the summit. But I don't have a prediction for you on what that's going to be.

And your second question again, I'm sorry was?

QUESTION: What is the IMF's current take on stages to the world economy right now? Usually there is an assessment that you provide going into these.

MR. RICE: You're quite right. There is usually an assessment. There will be an assessment and we will be releasing those documents as we normally do after the Summit. I think it's clear that the IMF over the past several months has been warning on the potential implications of the Eurozone crisis for the rest of the world with risks tilted to the downside. And as you say, there will be some discussion of that in Los Cabos. And beyond that we will have the update on our World Economic Outlook (WEO) in mid-July where we will have more specifics to add.

QUESTION: And then results on the 17th is the Egypt elections, the Greek elections and the French Parliamentary elections, three very important places. What is the status of the discussions with the Egyptians? Is there some concern regarding oil prices the effect of the outcome from Egypt on oil prices?

MR. RICE: I don't want to comment on the elections or anything related to the elections in Egypt, Leslie, but what I would say as we've repeated before, we stand ready to support Egypt during the transition. We have been having constructive discussions and look forward to advancing those discussions once the elections are concluded.

QUESTION: How would IMF approach an anti-bailout Greek government if such a government is the result of Sunday's elections?

MR. RICE: just to repeat what I said earlier, because I think in a way your question is a repeat of the very first question, which is let's take this one step at a time. Let's respect the process and the democratic process in Greece. And then the IMF will engage with, the new government that the Greek people would elect.

Okay. I'm going to say thank you very much to our friends in the room. Good luck to those of you heading for Los Cabos. And we'll see you in a couple of weeks' time. Thanks a lot.


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