Transcript

Washington, D.C.
Thursday, June 17, 2010

MS. ATKINSON: Good morning. I’m Caroline Atkinson, the Director of the External Relations Department and this is the regular bi-weekly press briefing. As usual it’s embargoed until 10:30 a.m. Washington time or 14:30GMT.

First of all let me just remind you of some upcoming travel and events for management. The Managing Director himself is in Europe this week, and he was in France yesterday, Italy today, Spain tomorrow. And tomorrow -- I beg your pardon, the following week -- we will be in Toronto for the G-20 Leaders Summit. The Managing Director and the First Deputy Managing Director, John Lipsky, will be there. We plan press availability at the end, probably a press conference if the timing works at the end of the G-20 meeting, and we’ll let you know about those details.

Also just after that, on June 29, I wanted to let you know that the Managing Director will be giving an important speech at the Peterson Institute in Washington. He will be participating in a luncheon meeting and making a speech on probably mostly IMF mandate issues, and there will be a debate afterwards.

The First Deputy Managing Director today and tomorrow is in Russia -- today in Moscow, tomorrow in St. Petersburg. Today it was a speech at the 150th anniversary of the Bank of Russia in Moscow, and tomorrow he’s attending an international economic forum in St. Petersburg.

And those are the main issues. Special Advisor Min Zhu will be going to Switzerland for the BIS annual meetings. Hhe will be there at the end of the month, and the others are also going to various things. We will let you know about the facts as they come up.

So I have some questions online, but let me start if somebody in the room would like to ask a question? Yes? As usual, please identify yourself and your news organization.

QUESTIONER: I just wondered, you know, given the statement on the surveillance yesterday on the G-20, some of the issues raised about, you know, the need to keep progress moving after the May 9 agreement that much needs to be done. Today you had a fairly successful bond issue, it seems to be, in Spain. You’ve got now this agreement by Spain and possibly more countries in Europe to make their banks stress tests public. I’m just wondering what do you read so far into the bond issue today, if anything? And second, do you have any sense of how far the disclosure of stress tests is going to go in Europe, and what contingency planning are you doing in case there are any surprises when the banks start to show their numbers?

MS. ATKINSON: Right. Well, first of all, I think that you pointed to two very positive developments today. I mean, I don’t want to get into commenting on market events, but clearly the Spanish auction is considered to have gone rather well. And also we do view the decision in Spain and Germany as well, on publishing stress tests, as very positive. Part of the issue always around the confidence of financial systems is uncertainty, and we have learned that dispelling some of this uncertainty, or maybe most of this uncertainty, through publication of stress tests can be very helpful. So I think that is a welcome, a very welcome step. And I’m sure that -- I think we have seen the tools and the ability of the European Union, the Euro area, to move to put in place support when needed. So I think the stress tests are likely to lead to a positive outcome.

QUESTIONER: Can I just follow up on the ability of putting help in place when needed? In the event there are issues either out of the Spanish banks, German banks, or others, does the IMF envision each country being fully able to manage those problems or do you see the larger Euro Stabilization Fund playing a role in banking sector issues specifically or the ECB?

MS. ATKINSON: Yes, I don’t know that I want to get into that particularly. We have seen that Europe is able to come together. They’ve put together this Stabilization Fund. I believe that some of the money in the Greek package -- and we can get back to you on the details -- is going to support the banking system. I can’t imagine that there will be many countries applying to this financing mechanism. I think it’s there as a sort of stop gap, contingency, and so on. But I think we can be reassured by the fact that it is there and by the fact that governments have decided, or central banks have decided, to move ahead not just with the stress tests that they were doing anyway, but with the publication, which I think helps to close that loop

QUESTIONER: The bond issue went well, but Spain did pay a very hefty premium that has raised those questions about how long Europe can do that and that’s such a heavy price. What in your mind is the way that Spain could tackle that? I mean how long can it continue to do this without some sort of contingency backing, you know, that would reassure investors that it can continue to?

MS. ATKINSON: Well, I don’t want to speculate about what markets will like, but what I will say is that there are two important issues facing the Spanish economy. And one is not so much the debt level, which is actually not particularly high, but dealing with the deficit in a way that is convincing. And we’re impressed by the deficit targets that they have announced, which seem fully appropriate. They have serious steps with an upfront, frontloaded adjustment which is fully appropriate in the light of the pressures that they’ve been facing. And obviously, you know, for 2011 we’ll have to see what measures are there for supporting the fiscal adjustment. So that is one important element,in the fundamentals, and I would imagine the markets would be looking at those to see that the Spanish government is addressing their fiscal issues.

But there is another important element, which is about having growth-friendly reforms, because we do know that credible fiscal adjustments need to take place, -- or are much more successful, -- when there is growth. And yesterday’s measures -- we don’t have the details of them yet on the labor market -- are one part of this opening up of the economy, providing more opportunities for jobs that should lead to greater investment, stronger growth, the kind of growth-friendly reform that is the other part of what is needed.

QUESTIONER: I just want to follow up. Has Spain asked for some sort of IMF-EU help? I’d rather ask you so that we can get it off the table.

MS. ATKINSON: That’s fine. Thank you very much for asking me. I know there have been a lot of rumors around. I can repeat with confidence that there is no truth to these rumors.

I have a question online which is on Spain. “Is the austerity package announced by Spain enough or too tough?” I’ve sort of replied to that already I think by saying that we believe that the targets that they have announced are fully appropriate, that their upfront adjustment is also the right way to go for this year, and obviously the 2011 budget will have to specify how they reach the targets for 2011. Thank you.

QUESTIONER: I have a question on your note to the G-20 Ministers. You were saying that you were likely to revise down your forecast for the Eurozone. Seeing that the net effect of the depreciation of the euro could be a lowering of the growth, could you elaborate on that point? You were saying that since the euro was falling due to risk aversion, this could have negative effects.

MS. ATKINSON: Yes, I don’t have the language precisely in my head, but just to clarify what your question is, I think the note was trying to say there are two different impacts, two different forces that move in the opposite direction around European growth relative to our April forecast. On the positive side for growth is the euro depreciation; on the negative side for growth is increased financial risk. So the point is how those two balance each other out. We will update our forecast. In fact, we are going to have an innovation which I think is quite exciting. The WEO (World Economic Outlook) and GFSR (Global Financial Stability Report) updates this year early next month on July 8 are going to be launched in Hong Kong -- we’re taking them outside Washington -- and, of course, we’ll have the arrangements for the Online Media Briefing Center so you can call in from here. But also people will come to those events in Hong Kong, and at that time we will have the updated numbers. And I think what the G-20 note -- my takeaway from that on the global economy was, and what Managing Director and others have said, is the global economy is recovering. That is the baseline scenario. There are increased downside risks which we’ve seen. We always warned of them. So that’s a different thing from saying we expect the projections to be lower. That’s not what I believe we expect. Yes?

QUESTIONER: Could a country in Spain’s situation access a flexible credit line or would it have to have conditions attached that are similar to other funding opportunities?

MS. ATKINSON: Just to clarify, we have no request from any country and we don’t expect any requests from a country for access to any kind of IMF facility. And access to any facility requires a request. As far as a flexible credit line goes, we’ve just announced for example renewal of Poland’s flexible credit line. You’re probably familiar with the procedures for Poland, Mexico, Colombia. And we don’t specify a program in the same way as we do for the other facilities because there is the basis -- the track record and the policies in place are sufficient for these good performers who have accessed a flexible credit line.

QUESTIONER: Can I follow up on that? I understand very clearly that there’s been no request for flexible credit lines or any other funding from Spain. Can you confidently and clearly say that there have been no discussions between IMF, Spanish officials, and EU, about contingency or planning for funding? So I’m not saying that there’s a request -- a request is an official “We would like money.”

MS. ATKINSON: Yes, but I’m not trying to play around with the words of whether there’s a request or not. In other words, I’m not trying to be --

QUESTIONER: So there’s been no discussion for contingency plans?

MS. ATKINSON: Okay, I want to be clear. We discuss everything always with everyone. And, you know, that happens with my colleagues all the time -- and I’m not aware of every discussion everywhere on anything. But I am certainly not aware of discussion around -- and we also discuss contingencies all the time, that’s sort of part of our job -- but I’m not aware of any discussions that would be the kinds of discussions that you’d have preparatory to a request if that’s sort of what you’re getting at.

QUESTIONER: Yes.

MS. ATKINSON: When I say there’s no truth to those rumors, I’m not trying to be clever with the wording of what a request is. It just seemed to be what you were driving at.

QUESTIONER: Can I just -- not to press the point, but it seems like --

MS. ATKINSON: Not to press the point?

QUESTIONER: Well, to press the point maybe. You’ve got now a major rollover in July, I think, for Spain of a couple of tens of billions of dollars. You’ve got this potentially very sensitive body of information that’s going to be spilling out at some point soon on the banks, which maybe it will look great and everybody will be encouraged or maybe it won’t. And, you know, it seems to me that this is the precise sort of fork in the road that you guys would be saying, okay, let’s really buckle down now and look at what might happen here and, you know, hope for the best, prepare for the worst sort of thing. I guess we’re just wanting a flavor of what sort of, you know, preparatory work is being done in the event that once they spill all this data out on the books and once they go to the markets for $25 billion if it doesn’t work out, you know, it won’t be six months to resolve the problem like it was last time around.

MS. ATKINSON: Well, I think when we went -- and I read your interesting piece -- but when we were talking about Greece, it was actually, you know, people can move very quickly. I want to just repeat what I’ve said that we don’t -- this is not what we’re envisaging. And what we do see and what we are encouraged by are steps that the Spanish government is taking and has taken and is announcing that are very serious, very courageous, and quite appropriate both on the fiscal and on reforms to their economy that can promote growth and jobs over time, and now the decision to publish the stress tests. So I think in those three key areas, the government has taken decisive action, decisive and appropriate upfront action.

I’ve got a question here on Portugal which is, “What is your evaluation of current financing conditions in Portugal? Would it be advisable to consider the use of the EU IMF funding package? If one of the Iberian countries needs to activate the EU IMF rescue package, should the others follow?” And again, let me give my answer by saying that we’re not discussing the use of the EU or of our money with any of these countries. And maybe just to clarify because it refers to the EU/IMF funding package, there is a new EU Stabilization Fund that’s now fully in place. You’re all aware of that. For the IMF, we have as you all know our normal procedures. We deal with countries on a case-by-case basis, on an individual basis. So it’s not that there’s some pot of money that is joint with the EU, just to clarify that. And maybe that helps to answer the second point which is that we deal with countries on an individual basis, and we wouldn’t conclude that because one country is in some circumstance and other countries should be as well. And we do think that in Portugal the authorities are doing, and we expect that they’ll do, what is required to meet the 2013 targets.

QUESTIONER: You were encouraged by the possibility of the Spanish stress test, of the banks there, being disclosed. Are you encouraging the other banks in Europe and other countries to also disclose the results of the stress tests?

MS. ATKINSON: That’s a good question -- but I may need to get back to you on that. Our general sort of policy position is that we believe that publication of stress tests is helpful. And –Germany, I believe, also overnight has announced that. And we’ve certainly welcomed that.

QUESTIONER: Given that the MD is going to Spain tomorrow, can you give us a kind of flavor what he wants, you know, who brought about this meeting? How did it come about? And, you know, what he hopes to achieve from that meeting?

MS. ATKINSON: Right. Well, as he mentioned yesterday, he is visiting a number of countries in Europe -- I mean, he was in Turkey; last week in Belgium and Luxembourg. I mentioned France and Italy also this week, and a few weeks ago we were in Berlin. So what he’s doing is speaking to government officials -- in this case the Prime Minister. You know that there will be a press conference tomorrow afternoon so, you know, that’s obviously the place where your colleagues can ask questions about what’s actually happened and happening and I’m sure you will. And so this is just -- I think we’ve been saying, you know, it’s a working visit. He’s in Europe. He’s going around and talking ahead of the G-20 meetings so it’s a good time to be talking about how we see the global economy, the challenges facing the global economy, Europe, and so on. And it’s been scheduled for a while -- if you’re asking when it was scheduled.

QUESTIONER: When is Mr. Belka’s successor going to be announced?

MS. ATKINSON: I don’t know, but we’re already moving forward on that in terms of the process.

QUESTIONER: Can you give us any readout on the mutual assessment report that is being prepared for the G-20?

MS. ATKINSON: Yes, what I can say is that we have found very interesting results -- you know, in that report there’s a sort of analysis of the policies that governments have told us they plan, and their projections, which seem fairly consistent one with the other. But what’s particularly interesting is that we did alternative scenarios and we find that in a positive scenario, with coordination from different countries doing not the same things but policies that are consistent one with the other, you can get a much better outcome. And our estimate, which I believe the Managing Director or somebody referred to last week, is that over the medium term, over five years or so, you could have 2.75 percent -- 2.5 to 3 percent -- higher level of output, maybe as many as 30 million more jobs, if you have a successful program of working, you know, if the framework proves successful in encouraging countries to do complementary policies. We’re submitting the report along with the two other reports to the G-20 leaders next week. Obviously it will be up to them how much of it they want -- whether they want -- to publish it and speak about it. As I said, the Managing Director will be giving a press conference at the end of the G-20 Summit and those are, you know, certainly important questions to ask. Because I think looking forward, we’ve been saying how important it is to have multilateral coordination and cooperation and, of course, that’s nice for people to be friendly, but it’s also important for a successful economic outcome from the recovery. I know you’ve been trying to ask a question.

QUESTIONER: I have a question on the banking tax. You were advocating for a financial stability contribution, a financial activities tax, and there was much reluctance to that from the G-20 Ministers when they met here in April. Are you still advocating that?

MS. ATKINSON: Well, we have a slightly revised but I think still fundamentally similar report. It was never officially published as you know in April. We will be submitting it to the leaders. I think there is a lot of interest in different ways of raising money from the financial system. I know the coverage has tended to be about lack of agreement, but I think what I would focus on more is that there is agreement which, you know, wasn’t necessarily obvious ahead of time, that there should be ways of ensuring that the financial system does bear a fair and substantial part of the burden from any financial crisis. And so then you need to think about, well, how does that happen?

And on the two different aspects, you know, we had one idea that was that you need to work also with the regulatory system to build up, and is aimed primarily at providing the financing in case there should be a future banking crisis. And then another part that’s aimed more at -- and again it needs to be coordinated with regulations -- more at addressing risky, systemically risky behavior. So I think those goals are still part of what we’re seeking. And we will -- I mean, I think we’ve made people available on these issues to the press to work to explain them, and are happy to do that again. But it’s in the hands of the leaders, I think, at the end of this month.

QUESTIONER: Just a follow up. Can you give us an idea of what the revision will be that was announced at Busan for the Toronto -- on the bank tax issue? There was a revision of the proposal announced.

MS. ATKINSON: No, I can’t -- well, again, I think that what we are working to finalize is the report, which was always the plan, if that’s what you mean, and we’ll be sending that revised report to the leaders, so I’m not going to preempt what we send to the leaders.

I have a question online which is about Argentina. “Have the Argentine authorities recently contacted the IMF to coordinate a future visit of your staff in order to do the Article IV? How much more time can there be without this review, and can we apply sanctions for this breach?” And I would just say that we maintain constant regular dialogue with Argentina. We have a Resident Representative there. We’re ready at any time to deepen that dialog with an Article IV consultation. We don’t have specific plans now, and I’m sure we’ll announce them whenever we do. Thanks.

QUESTIONER: Do you have any sense of what to expect from the banks’ stress tests out of Spain, any inside glimmer -- of better, or worse?

MS. ATKINSON: I think no. I don’t think I can say -- I mean, I don’t think that we’re sitting here worried about it. I think we think it’s a good thing to have them published. The Spanish regulatory system was relatively conservatively managed ahead of time. I can get back to you if you like on more details. I’m not a specific expert on that, but I do know that Spain was one of the countries that had a relatively conservative regulatory system and also provisions for extraordinary measures.

Okay, so I knew there was another question coming -- sometimes there’s a bit of a delay here. Let me take this. It says, “Dear Caroline, as always I’m interested in an update on Ukraine. Also are you doing anything with the Kyrgyz Republic?” Well, just to take the Kyrgyz question first, obviously the violence there is deplorable and we had an ESF which expired just last week I think. We were part of a joint donor mission in May that was looking at economic assessment with the World Bank and the ADB (Asian Development Bank). The findings of that were to be presented to donors at some point. That may be delayed; they obviously need to be updated to to see if there’s an impact of recent events, and our staff would be involved, with the World Bank and the ADB. I expect we would participate in that and in a donor’s conference.

On the Ukraine, a mission is expected to begin there next Monday, the 21st of June, and this is -- and you’ve been asking about that for awhile, so now we know that they will be starting that and that’s a mission to discuss how we take forward the IMF financing with the new government -- now, not quite so new.

QUESTIONER: Going back to the bank stress test. Has the Fund had any role in these stress tests? And you said you thought it was a good idea for countries to publish this, but you know, there’s considerable risk when it comes to publicizing this thing. And I guess the question of the markets is going to be, you know -- the markets are going to I guess decide if it’s good enough or not. And again, you know, you said it’s a good idea, and I’m kind of curious if you can expand on why you think that that’s a good idea. And also if you have Germany, France, and Spain publishing theirs, you know, surely everybody should because it’s all connected.

MS. ATKINSON: Well, maybe everybody will. I think it’s important and let’s be glad about what’s happening -- and it’s very recent that they’ve decided to do this publication. I mean my answer -- and I’m sure there’s lots of academic research and discussions in the GFSR and so on -- my answer on why is publication a good thing? I think we’ve seen this not just on bank stress tests, but also on country programs, reserves positions, and all the rest of it, that uncertainty is most upsetting for markets and investors. And so just knowing, having more information, is in itself reassuring because it’s addressing that uncertainty. And a stress test will also -- you remember there was a lot of skepticism about the stress tests in the U.S. here, but they really turned out to be quite a turning point. I don’t think there were particular surprises in what came out in the stress tests it was partly just the fact that that all seemed part of a process of addressing and taking seriously this issue and letting investors know and letting the markets know, and that in itself can be reassuring.

QUESTIONER: I’m sorry, does the Managing Director have bilaterals during the G-20? Do you know if any bilaterals are planned?

MS. ATKINSON: It’s a pretty tight timetable so I’m not aware of any.

I have a question online, which is a bunch of questions, but on Romania: “The government’s measures are being challenged in the Constitutional Court. What does the IMF think of the suit? What impact might it have on the IMF facility for Romania?” And it’s absolutely right that the fiscal adjustment measures, which are prior actions for our program, have to be approved by the Constitutional Court, and of course we respect that process. That’s an entirely appropriate process. We don’t think that that will lead to any -- I mean, that’s not something that we’re concerned about.

There is another question about Africa asking, “What are the latest macroeconomic growth figures for Sub--Saharan Africa?” And our latest numbers are for quite robust growth, a bounce back from recovery in Africa, growth of about 4.75 percent this year in 2010. We will, you know, update those -- that’s from our April Regional Economic Outlook, which has a lot of other details about how we see the outlook in Africa. But as I think some of you know who were with us, or your colleagues were with us, when we went to Africa earlier this year, we were impressed by the resilience of the region.

Also have a question here, if I may, on Pakistan: “Please update me on the IMF’s position on non-implementation of VAT power tariff. Are the government and the IMF holding meetings on these issues in the near future?”. And I would just say, you know, the Board approved the latest review for Pakistan just about a month ago, and so we do have an expectation -- what’s important is that sufficient fiscal measures in VAT are implemented, and also that there is action on the budget subsidies for energy. There is detailed information on Pakistan that is on our Web site, on www.imf.org through the “Country Notes.” But that’s something that will be discussed over the coming months -- we’ll see how it plays out. So I guess a quick answer to the question about updating is that there isn’t any new news.

Okay, well, thank you all very much. I repeat the embargo and again remind you about the WEO/GFSR update in July so that you can start to plan for that. And see you in Toronto I guess. Thanks very much.