Transcript of a Press Briefing by Caroline Atkinson, Director, External Relations Department, International Monetary Fund

March 31, 2011

Washington, DC
March 31, 2011
Webcast of the press conference Webcast

MS. ATKINSON: Good morning, I’m Caroline Atkinson the Director of the External Relations Department at the International Monetary Fund. Welcome to our bi-weekly press briefing. Before I turn to your questions and those online, I just wanted to let you know of some upcoming events.

IMF Managing Director Dominique Strauss-Kahn will be giving a speech on Monday, April 4th, at 2 p.m. at George Washington University to preview the Spring Meetings and talk about global challenges and global solutions. This will be open to the press and webcast of It is a student event and he will take questions from students, it is a kind of town hall Q&A as well.

The background chapters of the World Economic Outlook and the Global Financial Stability Report will be released on April 6thand April 7th respectively. The issues that will be addressed in these analytical chapters include systemic liquidity risks, housing finance and the issues around that, the state of the oil market, and capital flows. Min Zhu, the Special Advisor to the Managing Director, will be speaking on Sunday, April 10th at a conference in Bretton Woods, NH, organized by the Institute for New Economic Thinking.

–The Spring Meetings will be April 15th 16th. The World Economic Outlook main global forecasts will be released on Monday, April the 11th; the Fiscal Monitor, the following day, Tuesday, the 12th; the Global Financial Stability Report on Wednesday, April the 13th; and the Managing Director will be holding his usual press conference on Thursday, April the 14th. Then the IMFC, the International Monetary and Financial Committee, will be meeting on Saturday, April the 16th, and there will be a press conference after that, with the IMFC Chair and the Managing Director.

I would also like to draw your attention to two open seminars that we will be having at the time of the spring meetings. The first one is on Thursday, April 14th, in the afternoon, on emerging markets and the challenges facing emerging markets; and the second one will be a high level seminar on the Middle East and North Africa with a focus on youth and jobs and inclusive growth. The Managing Director will be at that, as well as the Central Bank Governor of Tunisia and the Head of Marketing for Middle East and North Africa at Google, Wael Ghonim, A full schedule of the meetings is available on and accreditation for journalists has been open for a while. Now I would like to open the floor to your questions Please give your affiliation and name, thank you.

QUESTION: I want to find out if the IMF is in discussions with Portugal for any sort of financial assistance. As you know, the deficit figures came in much bigger than expected today. I was wondering if you have any comment on that, and whether you think that there are steps that Portugal could take now to try to fix that situation, especially its credibility in the markets.

MS. ATKINSON: We have had no request for financial assistance from Portugal. The Portuguese authorities are facing a difficult situation. They have taken a number of important steps, embarked on a program of fiscal consolidation and have expanded that to a reform program. We believe that these are important steps will need to be continued. The fiscal consolidation is one element. Another important element is steps to promote growth and reduce unemployment, and urgent efforts to ensure the stability of the financial system.

QUESTION: Can I follow up on that? One of the big issues in Portugal is the political situation. Is there a case where the Fund could talk -– do you think that an interim government could address these problems? Clearly, the political system would hold up a lot of what needs to be done quite quickly in Portugal.

The question is whether you think Portugal needs to move immediately and can’t really wait for that political system to move through what it has to go through. And is there a case where the Fund has spoken to interim governments and negotiated with interim governments on steps to take immediately?

MS. ATKINSON: There is still a Portuguese government. Of course, it is a care-taker government at the moment. As I have said Portugal is facing difficult circumstances. It is perhaps interesting to note that all of the main political parties have earlier expressed their support for fiscal objectives and the objectives agreed with the European Union. So in that sense, continuing on these steps is not outside the frame of all the major parties. But as to what is the scope for the government, I believe the Finance Minister in Portugal spoke about that this morning, and, of course, the government is the one that knows what their scope is and is the one to define that for you.

QUESTION: I wonder if you see any spillover risks from the situation in Portugal to Spain, and if that is the case what Spain could do. And also, is there any IMF mission plan to go to Spain any time soon? Thank you.

MS. ATKINSON: Thank you. I would like to echo what others in the IMF have said about Spain which is that the strong measures that the government has been taking, over a period of about a year or maybe more now, on the fiscal side, on other reforms, to address labor markets and other areas to promote growth and better employment, more jobs, and their steps to strengthen the financial system have been very important. They also seem to have born some fruit in the markets and there seems to be a belief that Spain’s fundamentals are definitely moving in the right direction.

Our Article IV Consultation mission is scheduled under the normal 12-months cycle.We have no change in that.

QUESTION: Just to follow up, when you say, I believe that Spain’s fundamentals are moving in the right direction, you mean that is what the IMF thinks?


QUESTION: Good morning. Would you believe that this new third crisis in Eurozone, in the case of Portugal, will increase the suspicion of markets for these countries?

MS. ATKINSON: I think what is critical about the resolution of the European crisis is that there should be a comprehensive approach, and European leaders have taken important steps towards that most recently with the agreement to establish a permanent crisis mechanism. Other elements of a comprehensive approach include reform to economic governance, further policy actions in individual affected countries, and financial sector reforms. Ultimately, the success of the country programs will depend also on there being a successful environment.

QUESTION: You have been reassuring about Spain, what about Italy? And then another question if it is possible, you have said that until now Portugal has not asked for IMF support. Are you expecting it to ask for the support in the future?

MS. ATKINSON: I will just leave it at that we have had no request for financial assistance from Portugal and I do not speculate about the future. In the case of Italy, I do not have anything fresh for you. We will, of course, be publishing the World Economic Outlook on April the 11th, and that will contain our forecast for Italy as well as for other countries.

QUESTION: On the European package, the IMF realized quickly after the latest financial crisis that post-crisis resolution wasn’t enough, that it needed to try to stem crisis before it happened, so they brought along Flexible and Precautionary Credit Lines, and thought about other things. Is there some concern by the IMF that the European post-2013 package is also a crisis resolution package rather than a crisis preventative package? That the lending tools cannot be given in advance?

MS. ATKINSON: I think that there are important elements, and I have already referred to the need for a comprehensive approach. There are important elements of crisis prevention around the plans for strengthening economic governments and promote strong policies, so I think that is a pretty important part of what European leaders have been working towards. I think it is very important that the crisis resolution mechanism for the current EFSF and then the proposed European Stability Mechanism have been agreed, that is an important element in the comprehensive package.

I am going to turn to a couple of questions online. Has Pakistan requested that the Fund should cancel the ongoing Stand-By Arrangement program and started negotiations for a fresh loan program?

There has been no request for a new program. The current program is due to expire, I think, in September of this year. As you know, the Pakistan authorities and the IMF have continued to discuss closely what measures would be needed to strengthen Pakistan’s economy, and in particular, to address the social needs that exist in Pakistan to put the economy on a path for strong and inclusive growth going forward.

I have another question online: What is the IMF’s feeling on the stress tests in Ireland and their utility in restoring confidence?

I am just going to put that off -– we are expecting announcements, as you all know, from Ireland on their stress tests later today so I don’t want to anticipate those announcements now.

QUESTION: Aside from these stress tests, does the IMF still believe that Ireland should restructure unguaranteed bank bonds?

MS. ATKINSON: That is like, have you stopped beating your wife.

QUESTION: But it has been a position that the IMF officials have taken before, so I’m wondering if it’s continuing to take that position now?

MS. ATKINSON: As you know, there will be a mission to Ireland in the first part of April so beginning very shortly, which will be our first detailed discussion with the new authorities on the program in the next review. I do not want to anticipate the discussions that will take place there QUESTION: A question about the rating agencies. Would you say that the latest attacks against the Greek economy from these agencies are fair and justified?

MS. ATKINSON: I am not going to comment about the actions of the rating agencies. I have a similar question online: Standard & Poor’s has downgraded Greece’s debt deeper into junk status on Tuesday, saying that the bailout scheme agreed by the Eurozone leaders last week increased the likelihood of debt restructuring. Do I agree?

Perhaps I can just respond to your question and to these questions online by saying that the Greek government has made clear right from the beginning that they plan to service their debt obligations. Their program is based on two pillars: fiscal reforms, and very importantly, competitiveness measures to stimulate growth and revive the economy on a broader basis going forward; those two elements are the key to enabling them to pay all their debt obligations and to service their debts and return to normal market access.

QUESTION: Just in principle, does the IMF have a position that it is better for the IMF to provide financial aid as opposed to requiring sovereign debt restructuring? Is there a principle that has been applied historically in that sense?

MS. ATKINSON: The principle that we have is that whenever we are providing support to an economy, to a country, to authorities, it is important that that financial support aims to improve the underlying economic fundamentals and to restore the country to a position of sustainability and to a position where they would also be able to repay their debt to us.

Of course, on a case-by-case basis there can be different ways of approaching that. But that is our underlying principle: that our financing is aiming to support the adjustment that is needed to restore economies to health.

QUESTION: So just to follow up with that if that’s the case in terms of restoring economic growth, financial health, and the ability of the government to repay its loans, then restructuring of the debt could potentially go against those principles and it might seem better to expand a program than it would to talk about restructuring the debt, yes?

MS. ATKINSON: I would just say that we have a general principle which I have articulated about our financial support. We can also provide you with some of the other information, other work that we have done in the past on this particular issue. There have been a few cases where Fund programs have been accompanied by debt operations, and we look at these issues on a case-by-case approach. But clearly, in the case of Greece, the government has stressed the importance of their intention to pay their debt in full, and to get their economy into a position where their fiscal situation, their growth, is such that they are able to do that in an appropriate way. The goal of the program is to make the Greek economy a strong and successful one.

I have a question online: Do you have any updates on Ukraine, pension reforms and or Belarus currency devaluation? Mot quite sure what the question is on Ukraine. I can say that we remain in discussions with the authorities about their program and we are aiming to complete the discussions on the second review, and there are a numbers of measures outstanding which we are discussing with Ukraine authorities. I think these were outlined in mid-February after the last mission returned.

On Belarus, we also had a discussion in the Board earlier this month and released documents around that where we noted the stress in Belarus that is arising in part on the economic side from a big expansion in the current account deficit and so on.

I have a question online: Does IMF management agree with U.S. Treasury Secretary Geithner that the IMF needs more independence to publish its analyses including of exchange rates?

I do not want to address in particular -– I was not there and did not hear directly what Secretary Geithner said. What I will say is we do believe that openness and transparency are important, and actually we do typically include in our country analyses and in our multilateral reports comments on our judgment about exchange rates. We put these in the context of medium term fundamentals and multilateral judgments. And that is an important element, obviously, of our surveillance.

QUESTION: Italian news agencies reported yesterday that the IMF is going to cut the U.S. Growth and Japan’s Growth in the upcoming WEO. I wonder if you could tell us if you are more negative about U.S. growth prospects, thank you.

MS. ATKINSON: I am afraid I have to refer you to the World Economic Outlook release which will be on Monday, April the 11th. That is where we will go in detail to our new forecasts.

QUESTION: I know that the announcement is coming out at 1530 GMT on the Irish banks situation. Will you have a comment at that stage?

MS. ATKINSON: I am not sure. If we do, we will certainly let you know.

QUESTION: Just to be clear, what is the IMF’s feeling been about these stress tests? There is also news on the wire now that the ECB is not going to announce a short-term funding support for the Irish banks because of a dispute within the ECB and legal issues. Would that be a concern to the Fund?

MS. ATKINSON: All of those issues, I am afraid, are going to have to wait until after the Irish announcement.

QUESTION: Just following up on forecasts for global growth and the U.S. I believe you said a few weeks ago that oil prices rising would impact growth prospects and that the WEO would be adjusting its forecast based on that. Is that still the case?

MS. ATKINSON: We have a rule with the inputs into the forecast from commodity prices that we update the input that comes from oil for our projections and our assumptions on oil prices and other commodity prices depending on the size of movements in the markets. We do not make our own independent forecasts of oil prices; we go with the futures market prices. Since those have changed since the last time, we will incorporate a change into our forecasts.

QUESTION: Doesn’t it naturally follow that the large rise in oil prices on a non-exporting country like the U.S. would actually affect its growth negatively?

MS. ATKINSON: There are many things. If you are trying to get me to say what will be the change to our U.S. growth forecast, I would just say that there are many elements, of course, that go into our projections and I would caution you against picking on one and assuming that that has the dominant effect. So, on our forecast we will just be releasing them on April the 11th and I am not going to really steer you before then.

QUESTION: May I just follow up on that? May I point out that I didn’t actually prioritize oil, I was just pointing out that it was just one factor. Secondly, most of the concern on U.S. debt and deficit issues from the IMF and others has been a longer term concern, though the IMF has said that there should be a credible medium adjustment plan. The concern has been more about consolidation and fiscal management in Europe now and U.S. medium in longer term, correct? That’s my understanding.

MS. ATKINSON: What we have said is that countries -– since about a year ago, advanced economies that were under pressure in the markets clearly needed to act more quickly in order to resist those pressures and that for some countries there may have been more space in the short term. For all countries, certainly for advanced economies -– almost all -– it is important to look at the medium term fiscal positions which are threatened by or which have a number of costs coming forward. In the U.S. and elsewhere it is a medium term fiscal position and is of a concern but to affect that you need to take actions in the near term. You might need near term actions to affect a medium term position.

QUESTION: So I take that as basically a yes -- that yes, the concern has been while actions need to be taken now for the medium term that the concern is less about immediate issues in terms of debt and deficit in the U.S. now. I am wondering if that has changed in recent months and weeks in terms of the concern about U.S. debt and deficit problems.

MS. ATKINSON: Well, again, I want to repeat that we have raised concerns about the medium term issues of debt and deficits in the U.S. We remain concerned about those. And those, even though they may be issues that are not currently affecting market pressures and so on, they are issues that probably require immediate action. So that is why it is not a simple yes or no.

I have a question online about Yemen: Please describe the IMF’s engagement with the current government after talks earlier this month and any impact the violence has had. And the same question for Syria.

Of course, in Yemen, Syria, and other cases we deplore any violence and we hope for peaceful resolution of political issues–We have a program actually outstanding with Yemen and there have been contacts at a technical level with the central bank monitoring developments. We have had contacts at a technical level with a number of central banks in the region.

QUESTION: I’d like to follow up on Yemen. Is that program still in place or has it been suspended in any way?

MS. ATKINSON: Well, we do not suspend programs –-

QUESTION: Well, no, sometimes you do when it comes to political issues -– Ukraine, for example.

MS. ATKINSON: Well, perhaps it is just semantics. Our programs remain in place until they expire. Quite often in different occasions countries may not draw under the programs for different reasons including that we may not have reached agreement on economic policies or on policies that we believe will be sufficient to justify the financing. In the case of Yemen the Board approved a three year arrangement last July under the extended credit facility. There has not been any disbursement since then to Yemen.

There are a number of objectives of the program: supporting strong growth; diversifying the revenue base because there is an important need for expenditures especially for the poor and the vulnerable; and reprioritizing the expenditures to support capital investment as well as social spending. We have been in discussions about that for a number of months.

QUESTION: Can I just follow up? Have you had any other discussions with any other countries in the region -- Tunisia, Egypt -- just any updates?

MS. ATKINSON: Yes, we have had discussions in Tunisia -- we actually had a technical team there recently, last week. We also, with Egypt, expect to have a technical team visiting Egypt soon, in the next few days, that will discuss with the government the economic prospects in the light of recent events.

QUESTION: Are these Article IV teams or are they –- you said they’re technical but is it a lead up to Article IVs?

MS. ATKSINSON: Actually, in the case of Egypt we had an Article IV mission that had almost completed its work in January, I think. They came out just as the demonstrations were really changing things in Egypt. So to some extent those are continuations and we expect that at the time of the spring meetings there will also be discussions with a number of these countries when they come here. And obviously, we are working with them to see what the economic impacts are. It is very important to support strong and sustainable going forward to address the issues that have arisen.

QUESTION: Thank you. Just to follow up on that. To be clear, you are saying that these are not aid discussions, they are not discussions about funding for these countries, they are re rather simply understanding the economic impact of the turmoil and it would be premature to discuss aid at this point?

MS. ATKINSON: They are not negotiating missions. They are missions to asses the situation. They’re not financing negotiation missions, right.

Thank you very much.


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