Transcript of a Press Briefing by Gerry Rice, Director, Communications Department, International Monetary Fund, Washington, D.C.

June 19, 2014

Thursday, June 19, 2014
Webcast of the press briefing Webcast

MR. RICE: Well, good morning everyone and welcome to the press briefing. On behalf of the International Monetary Fund, I'm Gerry Rice of the Communication's Department.

As usual, we are on the record, and the contents of this briefing will be under embargo until 10:30 a.m. Washington Time. Also as usual, I have a few announcements, and I'll go to those and then come to our colleagues in the room and then online as well.

Actually, a little bit longer this morning on the announcements given that there's a lot going on. It's an especially busy season here at the Fund. We are in the midst of a number of Article IV consultations and communications.

On that note, today in just a few hours' time our Managing Director Christine Lagarde is in Luxembourg and will be participating in the Euro Group meeting and presenting our preliminary conclusions for the 2014 Article IV consultation with the Euro Area. So that's something that will be coming your way very shortly. That's on the Euro Area, the Article IV consultation with Christine Lagarde.

Let me also mention that Christine Lagarde will visit Mexico. We have a friend from Mexico in the room today. On June 25, 26, the Managing Director will be in Mexico to meet with the authorities, have discussions with them on the status of the Mexican economy, and also to take part in a major conference being organized by the Finance Ministry on the subject of financial inclusion. That's in Mexico next week, June 25, 26.

Christine Lagarde will then go on from Mexico to Jamaica to meet with the authorities there and participate in several events including at the University of West Indies where she will address students, faculty, and the broader community. We hope to have that event webcast for you, so you'll be able to follow it.

Let me mention also that our Deputy Managing Director Min Zhu will visit Mauritius on June 24-27. Now, this is to open the Fund's Africa Training Institute. It will be providing various courses aimed at macroeconomic management, financial sector, monetary policy, et cetera. Min will be making a speech at the opening of that Institute, the first of its kind in Africa, for the Fund. We will, of course, make that available to you. If I didn't mention that's June 24 to 27 in Mauritius.

Then on June 28th to the 30th Min will visit Madagascar for some bilateral meetings with the authorities. This comes on the back of our announcement yesterday of our Board's approval of financial assistance to Madagascar under the RCF, that's the Rapid Credit Facility.

Then June 24 to July 2nd our other Deputy Managing Director, Naoyuki Shinohara, will be in Asia to visit Mongolia, Hong Kong SAR, and Bangladesh.

Let me mention just two other things that may be of interest to you. On July the 2nd Federal Reserve Board Chair Janet Yellen will, here at the IMF, deliver the inaugural Michel Camdessus Central Banking lecture. That will be at 10:00 in the morning July 2nd. You are invited. It's open to the press. There will be a media advisory in the coming days.

This is a new lecture series, as I mentioned. We hope it will be an annual event on central banking. It does, I think, indicate the Fund's work and commitment in this important area, and our collaboration with central banks around the world.

As you know, Michel Camdessus was the Fund's longest serving Managing Director from 1987 to 2000. He will be the guest of honor at the event as well as having it named in his honor.

Finally, we are also publishing today, I mentioned the Euro Area Article IV earlier, we are also publishing today the statement by the Managing Director on the work program to our Executive Board. You can read it for yourselves. It focuses on where we are on the recovery, issues of managing monetary normalization, the role of public investment, the focus on structural reforms, and the steps to facilitate external rebalancing.

The work program is based on the global policy agenda which was shared with you at the time of the spring meetings. The communique of the IMFC, our Policy Steering Committee which also, of course, was shared with you.

So with that let me turn to any questions we might have in the room. Good morning.

QUESTIONER: Good morning. Poroshenko in Ukraine has moved to boot Stepan Kubiv from the Central Bank Chief after just a couple months there and replace him with a close ally and investment banker, a friend of his. How is this not history repeating itself? Does this give you cause for concern?

MR. RICE: Well, you know, Central Bank independence is very important to the IMF in Ukraine and in all other countries. We look forward to working with the new Governor, Valeria Gontareva.

QUESTIONER: So you're not concerned about the independence of the Central Bank?

MR. RICE: As I said, we are always concerned about Central Bank independence in the case of Ukraine, in the case of all countries. We look forward to working with the new governor.

QUESTIONER: Can I just follow-up on that particular issue? Does the move represent a challenge to conversation independence?

MR. RICE: You know, I wouldn't have a comment beyond what I just said, Ian, that Central Bank independence is something that we take very seriously. It's important to us, and leave it there.

QUESTIONER: Okay. Sorry.

MR. RICE: Can I move on and then we could come back?

QUESTIONER: Yeah, yeah. Absolutely.

QUESTIONER: You had a short statement this week about Argentina and the Supreme Court decision. I was wondering if you have any comment on Argentina's plan to swap international debt to their local jurisdiction. Is that something that will affect their relationship with them? Is that something that worries you in terms of international mood?

MR. RICE: With regard to the Argentinian response, you know, it's a matter for the Argentinian's authorities. I think it's best addressed to them. Good morning.

QUESTIONER: Good morning, Gerry. Two days ago the World Bank lowered the expectation of growth for Mexico this year. That followed a similar evaluation by the Central Bank. In April the Central Bank of Mexico also reduced their forecasted projections. In light of the current situation where the Mexican Congress is discussing the second phase of the energy reform I wonder how the IMF sees these developments? I know that you will have something to say later on the World forecast report, but right now how do you see these two developments, especially because, you know, they were really close, one announcement from the other?

MR. RICE: Well, I mean, you're right, we will have more to say about this at the time of the WEO, our World Economic Outlook in the second half of July. I don't really have a detailed or further update on the situation right now.

Perhaps just to mention again the context, Madame Lagarde is going to be in Mexico very soon, next week. I'm sure the status of the economy and the future outlook will be a subject of discussion there. Jeremy?

QUESTIONER: Hello. I have one question on Mali, I saw your statement yesterday. Does it mean that the next disbursement for the country will be, at the best, in September?

I also have a question on Iraq. Are you worried that the conflict over there could create a major disruption in the market and could end up like having consequences on the global economy?

MR. RICE: Yeah. On Mali, I need to come back to you, Jeremy, just on the scheduling of the review and so on. I don't have particular information on that. So let me come back to you on that rather than just make a general statement.

On Iraq, your question was really about the situation having an effect on the global economy?

QUESTIONER: And the oil market.

MR. RICE: And the oil markets in particular. You know, it's something, obviously, we are watching. I think the Managing Director made a comment on this the other day. The situation's evolving rapidly.

At this point it's difficult to assess the impact. Obviously, if there was a deep and long lasting impact it would have some effect on the global economy. Again, I think this is something we'll be offering a more detailed assessment of in the WEO update in late July.

QUESTIONER: Gerry, my first question is about there is a report that Mr. Thomsen is going to Athens on July 9th. Is he going to discuss the program? Is he going for vacation? Do you have any idea?

MR. RICE: I'll come back to you to confirm whether Poul Thomsen is actually going to be in Athens. I think I've said before, we expect a team to be in Athens in July, but the mission to conclude the review is not expected until after the summer.

So let me confirm, I think as I said the last time also, whether Poul will be part of that team in July or not.

QUESTIONER: Also, there are reports in Athens that the IMF is calling for additional fiscal adjustments and measures. I wanted to have your comment on this.

MR. RICE: We issued the Staff Report last Friday, for those who may not follow it as closely as you do, so just to mention that. There's a lot of information there. There was also a fair bit of communication around that including an interview with Poul Thomsen that was published.

On your specific question about the measures, we expect the government's 2014 fiscal target to be met, and we do not see the need for additional measures for 2014. Then for 2015, 2016 we, as always, need to assess progress in implementing the program in the context of the next review.

As you know, and this was referred to in the communications late last week, the primary surplus targets are rising to 3 percent of GDP in 2015, and to 4.5 percent of GDP in 2016, and beyond. So in order to bring down the very high levels of public debt additional efforts are needed. Simply relying on the projected economic recovery would not by itself be sufficient to achieve their targets.

But again, we will assess this in our discussions in, you know, the usual way with the Greek authorities. That will be later this year. Let me add one other thing because we do support the authorities' desire to avoid across the board cuts in wages and pensions.

That's why it's important to press ahead with fiscal structural reforms to modernize Greece's fiscal institutions. Such as strengthening tax administration for progress continues to lag, and so that everyone pays their fair share of taxes which the issue of tax reform is something we've emphasized over time.

QUESTIONER: Follow-up, if I may?

MR. RICE: Yes.

QUESTIONER: The Greek government the last few days has publicized, to say the truth, that they intended to go to the markets again, and they intended to do it soon. As I understand they are planning to issue a seven year bond. I wanted to have your opinion, do you agree with the decision by the Greek government?

MR. RICE: One of the fundamental objections of the program, as you know, is to restore market access for Greece. We welcome the previous bond issuance, and we welcome the announced plans in that regard as well. There's still a long way to go before Greece can rely entirely on market financing, but these are important steps in that direction. Ian?

QUESTIONER: Deputy Managing Director Min Zhu recently warned about housing prices, potential bubbles around the world, which have partly been fueled by easy money policies around the world. In your U.S. Article IV you also outlined the financial stability risks that easy money policies have the potential to propagate.

At the same time, you're encouraging both the Fed, and ECB, and the BOJ to continue its cheap cash policies. Are you having your cake and eating it too? Are you not potentially fueling the next financial stability crisis because of your calls for more easy money policies?

MR. RICE: Well, I think most people recognize, Ian, that in this crisis the steps taken by monetary authorities have played a very important role in helping the global economy to address the crisis and overcome the crisis eventually.

That said, the specific nature of IMF advice on monetary policy is, and has to be, country by country. You know, so there's not a generalized piece of advice on monetary policy that applies to individual circumstances. I think we have to look at each country's economy, and the details of that, and what is required, what we think is required, in terms of monetary policy and other policies in that specific context.

QUESTIONER: Well, sure. Then let me rephrase the question to you. Specifically target the U.S. whose economy and financial instability has, or did, precipitate a world-wide global recession. Are you saying that the need to spur growth in the U.S. outweighs the financial stability risks created by long-term low interest rates even with diminishing returns for QE policy?

MR. RICE: You know, we went into great detail just a few days ago, in the context of our assessment of the U.S. economy and the Article IV, including our views on U.S. monetary policy.

Where I think the gist of it is that we feel to this point the steps taken by the Fed have been appropriate and effective in that context. But, you know, the detail is there.

QUESTIONER: Just a follow-up on that. Yesterday Chair Janet Yellen spoke about the continued taper of the Fed's bond buying program, and she also mentioned that financial stability wasn't playing a big role in how they approached decision making. Do you think that it should be more of a consideration for the Fed? Do you have any more comments about how the taper is proceeding?

MR. RICE: I really don't have additional comments, because we had plenty of comments just two days ago, including on this issue. So I don't really have much to add on that, I have to say.

Let me turn online a little bit. There're a couple of questions. There's a bit more on Ukraine asking is the date of the next mission already set? I can say that the mission is planned to begin work on June 24 in Kiev, and to continue for about two weeks.

There is a question on Romania. What's the IMF's response to the Cabinet's plan to cut social contributions by 5 percentage points beginning on October 1, according to a statement from the Finance Ministry?

On that one I would say we share the objective of reducing the high tax burden on labor in an effort to stimulate jobs. However, the announced cut of the Social Security rate by 5 percentage points creates a fiscal gap, and will make it difficult to reach the fiscal target in 2015. Offsetting measures need to be identified.

I'll come back in the room.

QUESTIONER: Gerry, going back to the Madame Lagarde a couple of days ago, I have been here quite some time, since the day of Mr. Camdessus. I don't remember before a Managing Director talking about immigration as she did. Even when, you know, she mentioned this is very terse.

Usually you guys are very careful to try to stir from the political arena. Obviously, this is my perception, when she decided to make that comment I think that she decided to enter the political arena. You know, there is an intense debate right now in Congress. So the question is, why Madame Lagarde felt compelled to make this argument in this precise moment?

MR. RICE: You know, our job is to focus on what we see as the major economic issues facing a member country. So it's not really a question of deciding to intervene on a political issue at a political time. It's a focus really on the economics and the issues.

Again, the immigration issue, our approach, our advice is laid out in the Article IV. I think it's a call for a balanced approach to the immigration issue, but the detail is in that report. So again, it's really a question of the economics and not the politics.

QUESTIONER: I just wanted to follow-up on the Fed meeting yesterday. The comments by the Chair sent through the stocks prices around the world high to new records. Do you feel like these stocks' levels reflect economic fundamentals or are you concerned there could be some sort of correction in the month ahead?

MR. RICE: As you know, we don't comment on day to day stock fluctuations. Again, I think the broader risks to the global economy we've talked about in recent days. We'll talk about, the context of the WEO, and more specifically on the U.S., our views, including on financial stability, I think were laid out in the Article IV.

MS. RASTELLO: But I'm just asking because the World Bank released some report a few days ago, and they had these concerns that they could be, you know, emerging markets should prepare because there was going to be some corrections. I was wondering since the WEO is going to come in a few weeks if that's something on your mind too?

MR. RICE: You know, again, I think when we issued the last WEO in April we laid out our advice in terms of macroeconomic, macro prudential steps that countries may wish to take at this point. We will be updating that in just a few weeks' time with our next WEO.

QUESTIONER: Two days ago, Mrs. Lagarde made an apology to the United Kingdom. Since many people believe that Troika made a lot of mistakes dealing with a Greek program. Does Mrs. Lagarde plan to do the same since, as you maybe know, the situation in Greece is unbearable, and the suffering of the Greek people is unbearable?

MR. RICE: On that question, Michael, you know, the IMF has been very open and candid in its assessment of the Greek program with lessons from the past already incorporated in our current advice. Our focus now is the current program.

We have a strong partnership with the Euro Area institutions and with the Greek government. I think we share the same objective which is growth and jobs and recovery for the benefit of the Greek people.

QUESTIONER: When I get in a discussion with my wife usually, and I need to apologize.

MR. RICE: This could be too much information.

QUESTIONER: No, no, no. I need to apologize. Usually the best way to do it is just to say, I’m sorry, and not give her a whole lot of words. I'm not clear whether what you're saying is an apology exactly or whether it isn't. I mean, does the IMF need to apologize to Greece?

MR. RICE: There is no apology in what I said, but as I did say, I think the Fund has been very candid, including in various documents we've published over the last year or so, the exposit assessment on Greece.

I think one of the hallmarks of the IMF has been our candor. You know, I really don't have much to add beyond that. But no, this is not an apology.

QUESTIONER: Okay. Can I just follow-up on the other question I was asking? I just want to make sure I understand the IMF's position accurately.

It seems to me the IMF in encouraging the Fed to hold interest rates low for longer than the market expects that it does not believe that there are currently sufficient financial stability concerns, that those concerns outweigh the need to reign in cheap cash policies. Do I understand that correctly?

MR. RICE: You know, I think it's a question of balance, and it's a question of time. I think we need to look at how things play out in the coming period. Of course, it's ultimately a question for the U.S. Fed and their prerogative.

Okay. With that I'm going to leave it today and thank you for coming. Enjoy the World Cup. We'll see you in a few weeks' time. Thank you.


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