Transcript of a Press Briefing by Caroline Atkinson, Director, External Relations Department, IMF

May 20, 2010

Washington, D.C.
Thursday, May 20, 2010
Webcast of the press briefing Webcast

MS. ATKINSON: Good morning. I’m Caroline Atkinson, the Director of External Relations Department at the IMF and welcome to our regular biweekly press briefing. Just briefly, before I move to your questions, to let you know about some upcoming travel of Management and senior staff.

The Managing Director is going next week to Latin America. On May 25th, he will be in São Paulo on the first leg. He will be participated in a televised debate with some prominent Brazilian people who are going to have an interesting discussion about the role of the IMF in Brazil and the outlook for the global economy. He will be visiting a research institute outside São Paulo and meeting with the governor of the state. He will then be flying to Brasília and meeting with Finance Minister Mantega and also with President Lula. There will be a press conference and press availability then, and some journalists will be traveling with us.

He will then go to Lima, Peru, where he will be meeting with President Alan García and having a town hall debate with students, which will again be televised, and a debate, a roundtable debate, with some ministers from the region before joining the meeting of the Finance Ministers of the Americas in Lima.

As you know, there will be a G-20 Finance Ministers’ meeting the week after that in Busan, Korea, on June the 3rd and 4th, I believe.

Other events that you may be interested in are the Director of the Middle East Department is going to Dubai on May 25th to launch the Regional Economic Outlook for the Middle East.

And finally, we have opened now a web site for a major conference that the IMF and Korea, the Korean Government, are holding in the middle of July, just after the World Cup, and all of the online registration, the program and so on is available on our web site. And the conference is titled Asia 21.

So I’ll turn now to your questions. Yes?

QUESTIONER: Just one question on the conference. Will it take place in D.C. or in Korea?

MS. ATKINSON: I’m sorry, in Korea. In Daejeon, Korea.

QUESTIONER: A question on Greece. At some point, I think Mr. Strauss-Kahn mentioned that the Greek economy of course needs to be more competitive. And I was wondering is there any discussion between the IMF and the Greek government on further cuts in private sector jobs, their salaries, the so-called 13th and 14th salary that we have in Greece? Thank you.

MS. ATKINSON: Thank you. Actually, that’s the same as the question that I have online which says: I’d like to ask you if Mr. Dominique Strauss-Kahn has really asked the Greek government to reduce or cut the 13th and 14th salaries in the private sector?

I’d like to answer that very clearly: No, that is not part of the Greek government’s program, and we agree with the government that there is no need to mandate cuts in private sector wages and salaries. Of course, there is an issue of competitiveness that the government is addressing with a number of measures in its program. Thank you.

QUESTIONER: Can I have a follow-up on that? So what do you see as the private sector contribution to be, not only on the competitiveness issue, but also to Greeks’ recovery?

MS. ATKINSON: Well, there’s a big contribution in the sense that looking toward the fundamental aim of the Greek government’s program is to provide an environment for strong growth, with investment in the private sector, and productive and sustainable job creation. The economic situation, obviously, in which the private sector will be operating, will be changed under the program to make it more open. There will be a number of measures to get rid of restrictive trade practices, to open up sectors for competition, and the economic situation now, of course. And what’s happening in the public sector of course exerts some pressures onto the private sector.

QUESTIONER: A question on Greece again, do you think that the rapid fall of the euro exchange rate is a welcome help to the program?

MS. ATKINSON: No, I’m not going to discuss that. I think that what’s important for Greece is that they deal with the twin problems of high debt and competitiveness, and of course competitiveness is relevant for Greece within the euro area, as well as outside it.

QUESTIONER: Just coming back to Greece on that issue, do you think the volatility—I’m trying to make sense of the volatility we’re still seeing—does the IMF think that this is, as the program moves forward and as fiscal programs are implemented in the rest of the euro area, that the volatility will calm down? What do you think is driving this volatility?

MS. ATKINSON: Well, I’m not a market expert, and we look at medium-term fundamentals and not at short-term market movements.

And we believe that the measures that the Greek government is taking—Greece is committed to, are fully appropriate, that it’s a bold and ambitious program. Many of the measures have already been legislated, and it may take time as these are carried out. As you suggest, it may take time for observers to understand these and to believe that they’re credible, and that’s not completely surprising.

Obviously, also, Europe has taken some major steps to show the depth of commitment within Europe to a satisfactory outcome to this crisis, and I believe that there have been interesting proposals put forward by the European Commission. I’m talking beyond the support packages that were announced on May 9th. And we believe that the European governments remain fully committed to doing what it takes.

QUESTIONER: Do you think that the euro has neared or has already reached its medium-term fundamental value against the dollar?

MS. ATKINSON: Well, we don’t, as you know, like to comment on short-term oscillations in market levels, but I believe the First Deputy Managing Director John Lipsky yesterday mentioned that from the basis of looking at the medium-term fundamental equilibrium, we don’t see the that the current level poses any problems.

QUESTIONER: The first payment to Greece was made when? And I think there is some confusion you have on the condition of that loan, like they wanted to confirm it was a three-year loan. It seems it’s at 5.5 billion. How much of that is a normal SDR-rate plus 100 basis points and how much of that is extra?

MS. ATKINSON: Okay. On the details of the interest rate on that particular portion, I might need to come back to you. But as is usual with the IMF—the program was approved on May 9th, it already seems a long time ago—and the money was disbursed in the following days, the 5.5 billion euro from the IMF, which is part of a total of 20 billion euro that was to be made available immediately.

QUESTIONER: A three-year loan?

MS. ATKINSON: It’s a three-year loan, absolutely. The Stand-By—and that’s all available in detail on our web site. There’s a press release that describes it and that describes the Board meeting that approved the loan, and there are also now available what we call the staff report which describes the staff’s view and then some of the authorities’ views on the nature of the program—what the plan is setting out. And yes, the Board has agreed a three-year Stand-By Arrangement for Greece.

QUESTIONER: But it’s 30 billion, not 20, a combination of 20?

MS. ATKINSON: Yes, I’m sorry. The 20 billion is for the first payment, adding together the amount that will come from the IMF and the amount expected from European partners which they have approved. So I know there are a lot of different numbers flying about, but yes.

QUESTIONER: Just to understand how the reviews are going to work, are you and the E.U. having targets for each quarter. Is that how you’re going to work too, and are you going to do the reviews together?

MS. ATKINSON: The IMF programs typically have quarterly reviews on the basis of which we release future tranches which are divided, according to a disbursement scheduled—a planned disbursement schedule which is laid out again in those documents. So it’s a typical process for us that we have quarterly reviews.

And in this cooperative and joint program, we do expect that the missions to review the program will also be joint, and we expect the first mission is likely to take place sometime in July.

Okay, so turning to this question online on Romania: Given the protests and unrest, would the IMF be open to any renegotiation with the government of 25 percent pay cuts to public sector employees and 15 percent cuts in pensions, and what does the IMF think of the protests?

This gives me an opportunity to clarify that the IMF did not specify or insist on any wage cuts with Romania. We did agree with the Romanian government that some further fiscal tightening would be needed in order to put their program back on track, and just to remind that the ultimate goal of the program is of course to have sustainable public finances that will allow for a recovery.

And there are of course different combinations of expenditure cuts and tax increases that can deliver a particular amount of adjustment, a particular fiscal deficit, and the government chose to focus primarily on the expenditure side—and in particular on wage cuts. That was the government’s decision.

And of course there are no easy options when there are budget cuts, and we have been clear that in Romania, as elsewhere, it’s important to protect the most vulnerable and to have measures that limit the impact on society and can get the most ownership within society.

QUESTIONER: What does the IMF think of the German proposal on naked short sales? Is it helping at all in this moment of uncertainty?

MS. ATKINSON: Thank you. Well, I’m not going to go into the details of particular proposals. There are a number of proposals around on different aspects of regulation.

What I will say is, and we laid this out in our Global Financial Stability Report that was issued in late April, that it’s important to—for governments to regulate is to focus on the fundamentals in these markets and improve those by, for example, pulling together the data sources, and there are already some data sources on credit default swaps or CDS, and improving the operational infrastructure of markets.

And finally, of course, it’s important that regulators should work together, so that there isn’t regulatory arbitrage across borders.

I have a question online about Spain: What’s your assessment of Spain’s recent measures to curb the deficit, for instance, cutting public sector salaries 5 percent this year?

Well, we do have a mission in the field, an Article IV consultation mission as part of the regular Article IV process, and I believe that’s due to conclude next week. And of course whilst they’re there, I’m not going to make comments on particular measures. That’s the view that they’re forming and discussing with the authorities there, and probably the concluding statement of the mission will be published next week. At least that’s what’s happened in the past with Spain.

QUESTIONER: I was wondering if you have any update for us on talks with Ukraine and whether the mission is going anytime soon?

MS. ATKINSON: Thank you. Well, discussions are continuing with Ukraine. A mission is not yet scheduled, and we expect that it will be going, but there is no update on that status.

QUESTIONER: And just to follow-up on that one, this week there was news that growth is rebounding pretty quickly in Ukraine. I was wondering whether you have a comment on that and whether that in any way could influence what the program is going to be about?

MS. ATKINSON: You’re right that there was good news on growth. We still have our baseline scenario which is, I think, 3.7 percent growth rate this year, and of course quarterly numbers can move around a bit. So that’s the baseline that we have.

Of course, when a mission goes and negotiates a program, the very latest data would be taken into account, and that would tend to affect somewhat the details of the program, but in a broad sense.

I have another question online which is on Sri Lanka and says: Please describe the status of the third tranche of the IMF program, and asking whether you have noted the report from the International Crisis Group on War Crimes that was issued this week and whether we can describe the purpose of the IMF’s trip to the North?

On that, again we have a mission in the field. We expect that that will conclude fairly soon, and of course we will issue a press release when that happens, that will explain where things are. In fact, yes, at the end of this week. So that means probably tomorrow.

And the travel to the North was part of our usual, or what we’re trying to make a usual, practice for all of our missions, where we go outside the capitals and meet with people more broadly. So that’s just a usual practice of traveling to different regions.

And on the war crimes report, yes, of course, we’re aware of that, and that’s something that is of concern and interest.

QUESTIONER: My question is on you’ve probably seen the measures taken by the amendment in the U.S. Senate this week, on trying to make sure that countries that the U.S. might believe might not pay back the IMF in loans, that the U.S. would abstain against those loans. There is a hearing today on the Hill, on the same issue.

I was wondering if you have any comments on whether you think that this has any meat about it or are you concerned about it? Has the Managing Director been up to the Hill to talk about these issues?

MS. ATKINSON: On your last question, of course, the Managing Director is often in touch with people on the Hill just as with people around the world and in other countries. I’m not aware of a recent trip to the Hill, but, you know, there are telephones.

I would like to clarify, and I’m sure you know this, that no country has ever lost money on its holdings with the IMF, whether money that it has lent to the IMF because we have some borrowed resources or its quota resources. And that’s because countries almost always repay the IMF, repay the IMF in full, and we have prudential balances.

So when countries are contributing to the IMF, again whether it’s through something like the NAB—the New Arrangements to Borrow—or through quota resources, their exposure is to the International Monetary Fund. It’s not to any individual country. And I think that’s an important point to bear in mind, that together with the very strong repayment record.

And of course as you know, we, the IMF Board has to consider—before making any loan—the sustainability of the country’s debt position and the repayment capacity. That’s why we have conditions.

We provide financing to help countries through short-term, temporary balance of payments problems whilst they also adjust so as to be able to rebalance their economies and repay the loans. We make loans available, not gifts.

QUESTIONER: Where do we stand on the NAB ratification?

MS. ATKINSON: Just to clarify, we have a certain amount of money available through the existing NAB, the New Arrangements to Borrow. There has been approval in the IMF Board for an expansion in the NAB group, of the expansion of these New Arrangements to Borrow. That approval was finally done in April—mid-April, I think.

And so the process of reaching consents from everybody is ongoing, and some countries require legislative approval. The U.S., as you know, already approved the legislation last summer. Some other countries have made bilateral loans already available to the IMF, and when the New Arrangements to Borrow, when the expansion is completed, those bilateral loans will fold into the NAB.

So this is a process that is going on now. We need a certain number of consents before the NAB is actually expanded, and that process is underway of seeking consents.

Okay, I have a question here online: Are there any similarities between the Greek and Italian situations? Is it possible that Italy or other European countries will have to face the problems and therefore need the same help from the European Union and the International Monetary Fund?

Well, of course, every country is different, and every country has a different starting position and is taking different steps now to address their issues. Many countries do have a need for fiscal consolidation. The recession to a large extent is responsible for a big buildup in indebtedness, and it’s important that that is addressed over the medium term in particular for some countries, and other countries have a more immediate need.

We believe that E.U. countries are taking steps to address these problems. I think what was announced on May 9th by the European Union, was agreement on how if there were difficulties these would be addressed, but there is no expectation now that that sort of approach would be needed.

QUESTIONER: Just to come back on the New Agreements to Borrow, are the $100 billion that the U.S. pledged available right now for you to borrow, and if not, what’s the process?

MS. ATKINSON: The amount from the U.S., that amount from the U.S. is available only when the New Arrangements to Borrow, the expanded NAB is in place. We do have access to the existing NAB which includes a contribution from the U.S.

QUESTIONER: Caroline, do you know when the Eurozone Article IV is? I thought they said it was going to be this week.

MS. ATKINSON: Yes, the Eurozone Article IV is being conducted at the moment. The final statement, the concluding meeting I believe is only in early June, June 7th—the concluding political meeting.

There are discussions at the end of May. I think most of the team will come back. It’s always a little awkward to arrange the final meeting, and that will be June 7th.

I have a question to which I don’t have a very satisfactory answer, but a question online which is: Has the IMF been in touch with the new government in Kyrgyzstan and have they asked for additional help?

And I’m sorry; I’ll have to get back to him. I don’t have an answer for that. Sorry.

QUESTIONER: Could you just talk about what do you expect from the G-20 coming up, the Finance Ministers? I know that you probably want to talk about that closer to the time.


QUESTIONER: But there is this proposal obviously on the financial tax. That’s obviously being cleaned up around the edges. So you would see a proposal going to the Finance Ministers and then a further firm proposal to the G-20 leaders?

MS. ATKINSON: Yes. On the financial tax, that is going to the leaders in June. I was about to say it’s not until June. Then I’m thinking, well, we’re already halfway through May. So you’re quite right, it will go to the leaders in June, and the next step is for it to be discussed with leaders.

No more questions? Okay, thanks very much.


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