Transcript of a Press Briefing by William Murray, Deputy Spokesman, External Relations Department, International Monetary Fund

February 28, 2013

Washington, D.C.
Thursday, February 28, 2013
Webcast of the press briefing Webcast

MR. MURRAY: I'm William Murray of the IMF's External Relations Department. This is one of our regular briefings. We're embargoed until 10:30 a.m. Washington time, that's 1530 GMT. One point I wanted to make in terms of the use of the press center, please submit your questions as soon as possible because I do want to get to as many online questions as well as questions from the journalists gathered here at IMF headquarters, so submit your questions as quickly as possible.

What I'm going to do is run through a few public engagements and other announcements and then take questions from everyone here and outside the Fund. First starting with public engagements of the Managing Director Christine Lagarde, she will be in Ireland on March 8. This will be the Managing Director's first mission to a Euro Area program country.

While she is in Dublin she will meet with the authorities of course and she will also deliver a speech shortly before midday Dublin time at Dublin Castle. The speech is expected to be web-streamed live on our website If you're in Washington or in eastern standard time, it will probably be around 7:00 a.m. Washington time on March 8.

The Irish authorities as you know currently hold the E.U. presidency. The theme of the presidency is jobs and growth. Clearly this is something that the Managing Director will echo in her remarks in Dublin.

She's also meeting, as part of her visit to Ireland, with a broad spectrum of women leaders from Ireland. That is also on March 8 which happens to be International Women's Day.

After Ireland you'll see that the M.D. will travel to Algeria on March 12 through 14. During her visit to Algeria she'll meet with senior government officials, representatives of the private sector and other key players in Algeria.

On March 19 the Managing Director will give a keynote speech at the Frankfurt Finance Summit. Media relations will be in contact with you regarding advanced access or embargoed access to the M.D.'s speeches and that will follow later.

David Lipton, our First Deputy Managing Director, will be the keynote speaker at the annual dinner of the Chartered Financial Analysts Society of Washington on March 12 obviously here in Washington and media relations will get back to you in terms of embargoed access to text.

Deputy Managing Director Naoyuki Shinohara will travel to Central America next week. He will visit Guatemala on March 4 and 5 and Costa Rica on March 6 and 7. He has meetings with the authorities and members of the national legislatures in each country. They will also be conducting press conferences in Guatemala and in Costa Rica. I would contact Rafael Anspach in our press office. He will be traveling with the Deputy Managing Director and he will have more details for you.

Deputy Managing Director Nemat Shafik will travel to Jordan on March 4 through 6 for meetings with the authorities, and then on March 7 she'll deliver two speeches in London. The first is the annual Maggie Nally Lecture at the House of Lords that's going to be entitled "Communication, Engagement and Effective Economic Reform: The IMF Experience." Her second speech is to the Nuffield Trust Health Policy Summit on fiscal implications of public health care reform and that's also on March 7. Again, media relations will get back to you about advanced texts.

A couple of other housekeeping items. On March 8 we will be launching press registration for the Spring Meetings of the IMF and World Bank Group. That's March 8, a week from this Friday. Online registration will open and media relations will be sending out an advisory with details. I would expect that as we get closer to the Spring Meetings we'll have a briefing here that will be focused mostly on the agenda for the Spring Meetings but that's some time away.

Lastly, a reminder. Last night we posted "Finance and Development" magazine's latest edition. This issue looks how the Arab countries in transition can move ahead to achieve strong and inclusive growth. Masood Ahmed, Director of our Middle East and Central Asia Department, has an essay that discusses what can help smooth the path for Arab countries in transition and there's a whole host of other essays in there including various authors on political reform, social justice and private enterprise and the middle class. David Lipton, our First Deputy Managing Director also offers a view on what he sees as the region's defining moment.

That's housekeeping for this briefing. Now let me take your questions.

QUESTIONER: After the Italian election, difficulty of the stability of the new government or difficult governability. There has been a lot of concern expressed from different sides and I was wondering if the IMF shared this concern in terms of the risk that a nonstable government could deepen -- to the crisis in the Euro Zone.

MR. MURRAY: Let me step back a little bit first of all and say what we think generally about Europe. I'm not going to talk about political trends and political developments specifically in any country. We really don't do that, but let's take a step back and talk about Europe in general. Growth and employment in Europe is weak and getting the pace of fiscal consolidation right is of the essence. Countries under market pressure meaning those that have to come to market to finance their fiscal positions actively need to sustain consolidation efforts. Adjustment elsewhere should be conducted at a pace that helps countries bring down their budget deficits over time and support their economy. However, Europe in general has made great progress in terms of fiscal policies broadly speaking and Italy is an example of that. In recent years it's made significant strides in terms of its fiscal balances and that in the current environment is what we want to see Italy maintain.

QUESTIONER: If I can follow-up: The agenda of reform that had been started by the last government, that's what the IMF would like to see, keeping going on the same path whatever is the new government for the stability not only of Italy but also of Europe?

MR. MURRAY: Let's go back to what we said last year on Italy really hasn't changed. I don't know if you've studied the Article IV review, but let me remind you of what's in there, and that's really what our thinking is right now about Italy. It really hasn't changed significantly, so go back to our Article IV report from 2012 and you'll see more detail on this.

Key points: fiscal policy should be made more growth- friendly by shifting the composition of adjustment toward lower expenditures based on a thorough review of spending and also the adjustments should include looking at taxes. You need to accelerate the implementation of a comprehensive labor and product market reform agenda to boost productivity and labor participation and this is especially important in the context of youth and women in Italy. These were the broad themes, fiscal policy made more growth friendly and accelerating the implementation of comprehensive labor and product market reform. Those were the key themes of our findings last year, that's in terms of boosting growth and that remains the case.

QUESTIONER: We had an election in Cyprus also. What is the IMF's reaction to the results if you could tell us? And can you tell us when are you going finalize the MOU with Cyprus? Gerry told us many times from this -- that he expects some movement after the elections and maybe you know that the new president of Cyprus, Mr. Anastasiades, seems he is -- to sign the MOU as soon as possible. Are you ready to sign with him?

MR. MURRAY: I really don't have anything new on Cyprus to offer at this juncture. We continue to work with the Cypriot authorities, the European Commission, the ECB. Technical discussions with the Cypriot authorities are continuing and that's really where things stand. I don't have any elaboration on timelines at this juncture.

QUESTIONER: Did you have any contact with them after the elections?

MR. MURRAY: That's a good question. I don't have any detail in terms of direct contacts with the Cypriots after the election. I can get back to you on that.

QUESTIONER: The Egyptians say that they have invited the Fund to come and begin official negotiations. Has that happened? Number two, you've seen the dire warnings coming from Egypt regarding reserves and the brink of economic collapse. How quickly can you move on that program? And how does a program like this balance the need for economic transformation as well as meet the concerns about political risk?

MR. MURRAY: That's a big question, Lesley, but thanks for asking. I saw a report suggesting that they were going to -- specific detail of a request from the Egyptians. I don't have any information to suggest anything has landed before I walked in then door here, but let me tell you where we stand. We've received the revised fiscal projections that are based on a set of policy measures that the authorities intend to implement. Our staff is currently analyzing those new fiscal projections. Once we've had a chance to really go through them, we'll have a discussion with the authorities on next steps regarding our engagement. And as I think you've heard before, as we've said many times, we're fully committed to support Egypt at this critical time.

QUESTIONER: When did you receive those projections?

MR. MURRAY: My understanding is within recent days, but I'll have to get back to you on precision about that.

QUESTIONER: The Spanish bank just announced historic losses of 19 billion euro. It is something that the IMF had foreseen when it reviewed the Spanish banking sector and is it a matter for the IMF?

MR. MURRAY: Thanks for the question. This is a good opportunity to remind you of what financial sector assessments do and what they don't do. When we do a financial sector assessment in any country we don't look at specific banking institutions. We look at the system itself. Are there regulatory regimes in place to adequately oversee the banking sector? Is there sufficient aggregate capitalization in the banking sector to weather whatever stresses are imposed upon it from external factors and internal factors? I don't have any information on Bankia. I saw the news today, but I don't have anything specific on that. And Bankia would not be necessarily a specific institution where we would target.

QUESTIONER: Do you fear that it could trigger some financial instability in the country?

MR. MURRAY: I have no indication that the Spanish banking system is -- Spanish [regulatory] banking regimes have been among the strongest in Europe if you look at it, so I have no indication that that's going to be the case.

QUESTIONER: My first question is on the sequester. What will happen in the United States tomorrow besides political -- what do you expect to happen tomorrow?

MR. MURRAY: I was actually going to ask you a few questions along those lines before. Sequestration in the United States is one of the key issues of the moment obviously and we'll see what happens Friday. Everybody is assuming that sequestration is going to take effect. What does that mean? I assume that's really the question you have. What it means is we're going to have to reevaluate our growth forecast in the United States and also our other forecasts.

QUESTIONER: My second question is on Croatia. The IMF delegation visited Croatia recently. Have they discussed any kind of new agreement with the Croatian government at that time?

MR. MURRAY: We issued a statement about 10 days or less on Croatia which was fairly detailed in terms of our views on the Croatian economy. I have a note here that I want to look at. My understanding is we have not received a request for discussions on an IMF program from the Croatian authorities. We're providing technical assistance to Croatia right now on tax administration and other fiscal matters, but we have not received a request for a program.

QUESTIONER: I want to ask about Ukraine. It was previously felt at different levels that the IMF assist Ukraine to erase the heavily subsidized gas prices just to cut the budget deficit. A couple of days ago, the Ukrainian president declared that the country will not increase gas prices. In this connection I want to ask you firstly do you here at the IMF still think that the increase of gas prices is important for Ukraine? And secondly, an update on the talks about the new standby program.

MR. MURRAY: I've seen the reports. As you know, we have taken note of those comments but we have ongoing technical discussions with the authorities and I'm not able to get into detail about where we stand on that. But I do refer you back to the statement that we issued on February 12. Those are our current views on Ukraine.

QUESTIONER: If I can follow-up. How -- raising of the gas prices for the new negotiations for the --

MR. MURRAY: I'm not going to get into the details at this juncture, but when I'm prepared to do that I will follow-up with you and anyone else.

QUESTIONER: Turning to Greece, the mission is either there or is beginning soon. What are you looking at and what are you hoping to get out of it?

MR. MURRAY: You're correct. There is a mission on the ground. Obviously when there's a mission on the ground I'm not going to get into the nitty-gritty, but let me see if I can help you out a little bit. We've announced that there is going to be a staff team starting discussions on the third review of our existing program with Greece. That includes representatives from the European Commission and the European Central Bank. They're there this week and the expectation is this mission will conclude mid-March.

One point before I get into some other details. The point I want to make about this, I'm not going to get into the exact details of the mission, but I do want to make a point about the nature of this mission because it's important to make these points. First of all, the team is working on the review of the extended fund arrangement that we have with Greece, that's standard, that's part of the review, but the IMF team is also doing the Article IV review of Greece as part of its work. We have not had an Article IV review in Greece since 2009. Typically under the procedures we have, countries that are in an IMF program do not have an Article IV review. They can be annual, but when you're in a program situation, they happen every two years. Greece as you all know had some serious public policy issues to grapple with, economic policy issues to grapple with, last year. It was mutually agreed to focus on the Article IV review this year. So it may not be a normal cycle, but this is by mutual understanding that we're undertaking the Article IV review with staff level discussion at this time.

QUESTIONER: If I can follow-up on the U.S. Could you elaborate on the impact of the sequester on the U.S. economy? And you said that you were going to reevaluate the IMF forecast for the U.S. Do you have any idea of the --

MR. MURRAY: Good questions. As you guys know, sequestration is a very complex issue. It doesn't happen immediately. It takes effect but it's something that will be phased in in the United States over the course of prospectively 7 months. The level of implementation of the spending cuts is really going to affect U.S. growth and the spillover effects. Precision is not there, but the assumption is if it was fully implemented, you've seen these numbers, a half percentage point, six-tenths of a percentage point off U.S. growth. Our current forecast for 2013 is 2 percent growth in the United States. So if you do the straight back of the envelope type calculation, that would be the impact of sequestration when it's fully implemented. The World Economic Outlook will be released in mid-April and will have to reflect on sequestration in that report and get back to you in more detail. In terms of spillover, again a lot of it depends upon how aggressively or how fully sequestration is implemented, but there will be an impact on global growth. The countries most affected will be those that have most active trade relations with the United States, so it goes from there. If they have active trading relations with the United States.

QUESTIONER: I want to return to Greece. Is Mr. Thomsen here in the building or he went down to Greece?

MR. MURRAY: My understanding is Poul Thomsen, the Mission Chief, will go next week. He's not on the ground at this point.

QUESTIONER: There are a lot of reports in Greece that the Troika asked the Greek government to fire 25,000 people in the next 3 months. Do you want to comment on this?

MR. MURRAY: Yes, I do want to comment on this. I'm glad you brought that up. The numbers are all over the place, too, first of all, so that that number is in the ether, but I'm not sure how accurate it is. We've explained this before, so I'm repeating our view on this. Greece has done a very impressive job so far on fiscal consolidation. If there is more progress with structural reforms and especially if Greece can do a better job of collecting taxes, then the government should be able to avoid further wage and pension cuts. That's an important point. If Greece can do a better job collecting taxes, then the government should be able to avoid further wage and pension cuts.

Regarding public sector employment, the government is producing staffing plans for each of its ministries. That's underway. It's expected that these plans will be used first and foremost to ensure that critical positions in the government will remain fully staffed as the public sector goes through a wave of retirements. To the extent that staffing plans identify surpluses of some types of employees, the government may need to adjust employment levels through mandatory redundancies, but this is ongoing work. We have not yet discussed the numbers with the government. And as I mentioned, collecting taxes will feed into the end result. Let's try to move on to other topics, but go ahead.

QUESTIONER: Can you confirm that the IMF and the Europeans gave a report to the Greek government in late January saying in this report, "That the tax system in Greece is not existent"? And also, "And that the tax collection and monitoring mechanism are in complete disarray"?

MR. MURRAY: I'm not going to comment on those quotes. I understand there is technical assistance or a draft report that was somehow leaked, but I have not read the report myself. I'm going to comment on content, but I will repeat that improving tax collection is critically important.

QUESTIONER: Are you satisfied with the work of the tax --

MR. MURRAY: I just answered your question earlier. Improving tax collection will feed into public staffing levels.

Let me deal with some people that are dialing in here. We have a lot of questions, so here we go. Bear with me. This is on the Dominican Republic, "They say if the U.S. sneezes with a cold, smaller nations catch pneumonia. Are you concerned about spillovers from the U.S. to its neighbors?" A separate question, "When will a new IMF mission come to the Dominican Republic"? I don't have any details on the D.R. mission. If there is one, we'll get back to you on that. I think I have to refer back to my comments earlier that countries that have active trade relations with the United States will be affected by the sequestration developments, but again we have to see how deeply the spending cuts are implemented.

I have two questions from Argentina. I'll do both. First question, "Could you explain the practical implications of an IMF motion of censure? Would this freeze credit from the World Bank?" It's a process. I'm not aware of any freeze in credit as a result of the action taken by the Executive Board a few months ago. It started a process and that’s really where it stands and plays out into November. We have active engagement with the Argentine authorities on the data issue and we hope to continue that engagement. A second question from Liliana, "Argentina does not allow the IMF to do the Article IV report. How much longer will the IMF allow this? Where there any talks with Argentina to authorize this report?" I guess what she means is authorize an Article IV report. The Executive Board had a review of the situation with Argentina and we published a press release and this was a month ago or so and that's really where things stand. I'm not aware of any further discussions on the Article IV at this time, but certainly things could move ahead. We would hope over time that they would move ahead, but I don't have any indication that they're moving at this juncture.

QUESTIONER: I want to clarify on the outlook on the effects of the sequester. Would you be looking at revising 2013 numbers or 2014 as well?

MR. MURRAY: The latest World Economic Outlook will be published in mid-April and we just had the one in January. Given the size of the U.S. economy and if you're revising downward U.S. growth significantly, and I can't be predictive exactly what our number will be in April, in theory would have an impact but I'm not sure where the baseline forecasts are going to go out from 2013 but certainly 2013 will be affected.

QUESTIONER: As the overseer of global financial stability, the Fund has surely been talking to members about possible implications of this already and what kind of contingency measures people should take. You're already seeing markets being affected by this. What is the Fund's role right now as this kind of -- this is potentially a big impact.

MR. MURRAY: We're having discussions with people all the time about spillovers and things of that nature, but I think it's a case where we have to see how far this sequestration is implemented and I don't think that's clear to anybody. I know it's generally perceived that sequestration will take effect tomorrow, but again because it isn't an immediate implementation of all spending cuts, then it's a political process that's playing out in the United States. We have to see how that political process plays out before we're going to be too definitive. I think that's true of anybody. Are there any other questions in the room here?

QUESIONER: If I can finish with Italy. You have explained saying that growth in Europe is weak.

MR. MURRAY: And employment.

QUESTIONER: And employment of course. But I would like to hear from the IMF if you believe that the Italian stability is crucial in this moment of government for the Euro Zone.

MR. MURRAY: In general, stability is a good thing. What we're talking about is in terms of economic policy, the Italian authorities have made significant headway particularly in terms of fiscal policy and we want to see that maintained. And also in general in Europe, not just in Italy, but it's important again that because of the trends in growth and employment, it's critically important. It's of the essence that countries get the right mix on the pace of fiscal consolidation and they have to look at their individual circumstances and determine how they pace that consolidation in the period head.

I have a question on Pakistan, "Please update me on a new program for Pakistan." [Recently a mission visited Islamabad and held policy discussions, but there has not been a formal request from Pakistan for new financing from the IMF. The Fund will remain closely engaged with Pakistan.]

Again let me remind you that we're embargoed until 10:30 a.m. Washington time, 1530 GMT. Press registration opens a week from tomorrow for the Spring Meetings. We'll brief you on that later. And media relations will be in touch on advanced access to the various speeches that I referred to at the top of our briefing. Again thanks for joining us and hope to talk to you again in the future.


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