Transcript of a Press Briefing by Gerry Rice, Director, External Relations Department, International Monetary Fund

June 28, 2012

Washington, D.C.
Thursday, June 28, 2012
Webcast of the press briefing Webcast

MR. RICE: Good morning everyone and welcome to this press briefing on behalf of the IMF.As usual this briefing with be under embargo until 10:30 a.m., that is Washington time. A couple of housekeeping things, and then we will get to your questions.

Monday, July 16th, we will have the update on our flagship publications. That is the World Economic Outlook, the Global Financial Stability Report, and the Fiscal Monitor. In addition, they will be released at 9:00 a.m. on that day, with a press conference with Olivier Blanchard, José Viñals, and Carlo Cottarelli. That is going to be here in Washington.

In terms of the Managing Director, Christine Lagarde will participate this week in the concluding policy meetings with the U.S. authorities, in the context of the Annual Article IV Consultation. I would like to bring to your attention, also, that she will participate in the mission's concluding press conference on July 3rd -- that's next Tuesday -- at 10:00 a.m., here at the IMF.

Madame Lagarde will then be traveling, as I think I mentioned the last time I was here, to Asia, and she will be going to three countries -- to Japan, Indonesia, and Thailand. On Friday, July 6, she'll be in Tokyo to meet with senior officials, and she will give a keynote speech at the Nikkei Special Forum. We expect a press conference that day also. The following day, July 7, the Managing Director will participate in a town hall meeting with the young students of Keio University in Tokyo.

She will then visit Jakarta, Indonesia. That's on July 8 to 10. And then, in Bangkok, Thailand, on July 11 to 12. And in both these places, again, she will meet with the leaders and senior officials, as well as with members of civil society. Of note -- in Bangkok, on July 12th, the Managing Director will participate in an Asian Development Bank-Bank of Thailand-IMF seminar, entitled "Toward a More Stable Global Economic System."

Finally, then, in terms of our Deputy Managing Directors, Nemat Shafik, on July 12 and 13 will attend a conference in Vienna to celebrate the 20th anniversary of the Joint Vienna Institute -- the JVI -- which, as I think you know, is a regional capacity-building and training center, financed primarily by Austria and the IMF. So, with that, let me turn to the room and take your questions.

QUESTIONER: As you know, Greece has a new finance minister. Can you tell us when Mr. Thomsen and his team are going to Athens? What is the process? And can you tell us what is the process after they go, and they meet with the prime minister and the new finance minister?

MR. RICE: I can tell you that a fact-finding staff visit, led by Mission Chief Poul Thomsen, is expected to go to Athens early next week as part of the joint mission with the European Commission and European Central Bank. This mission will assess the recent economic developments, and meet with the new authorities. This visit would then be followed by a negotiating mission to discuss with the authorities the policies necessary to achieve the program objectives.

QUESTIONER: So can you tell us when the negotiating team are going? As many people are saying, Greece runs out of money the last days of July. Do you think there is time for the review and the decision by the board?

MR. RICE: I don't have a date on the negotiating mission, as I was just explaining that next is a fact-finding staff visit. And, on the basis of that, there would be a follow-up mission to negotiate. And I don't have a date for you on that. In terms of your other question, the authorities can manage the budget for some period of time, without the next loan installment. And the upcoming discussions, as I mentioned, will help define what's required.

QUESTIONER: Before and after the Greek elections, there has been a debate about the negotiation of the program. Can you clarify which part of the program are you willing to renegotiate, and which part not?

MR. RICE: Well, I think we need to take it one step at a time here, as I mentioned in the previous answer. We will have the initial fact-finding discussions next week. We want to listen to the new government, to the new authorities and what they have to say. The objectives of the program, as agreed, remain the basis for those discussions. But, as we've said before, if the new government has ideas on how those program objectives can be achieved, then, you know, we are open to those discussions -- as we are, indeed, in any of our programs that we support. As I say, I think it's a step-by-step process here: first the fact-finding, then followed by a negotiating team that will focus on the issues that have been discussed with the new government. We want to wait for that before going much further into specifics.

QUESTIONER: Twelve member countries, including China, announced their specific pledges to help the IMF to increase its lending resources in Mexico. Would you comment on this? And how can the IMF make sure those investments, lending programs, will be safe against a background of a simmering euro zone debt crisis?

MR. RICE: As you say, during the G-20 leaders' meeting in Los Cabos recently, there was the announcement by the additional 12 countries to the additional resources of the IMF. These 12 countries are now part, actually, of a total of 37 IMF member countries, representing, actually, about three-fifths of our total quota membership of the Fund who have now committed to increase the Fund's resources by $456 billion, as was announced at Los Cabos, and thus strengthening the overall global financial safety-net.

In terms of a comment, I'd say obviously we very much welcome this support. It demonstrates the broad commitment of our membership to ensure that the IMF has the resources it needs to carry out our mandate to help ensure global financial stability. We very much welcome that all the BRIC, so-called "BRIC countries," committed, in Los Cabos, to participating in the increase in Fund resources. As to China, again, we're very appreciative for the Chinese contribution to these additional resources.

As you may know, Madame Lagarde had a bilateral meeting President Hu at the G-20, during which he reiterated the determination of China to play a significant role, in solid partnership with the IMF.

On the safety surrounding the use of these resources, well, maybe the first thing to say is a reminder, this is a global firewall. These resources are being made available for crisis prevention and resolution to meet the potential financing needs of all the membership. They will be drawn only as needed, as a second line of defense, after resources already available from quotas, and the existing NAB resources, after they are substantially used. If drawn, they will be repaid with interest. As always, we are committed to assuring that our members' interests and resources are safeguarded. This is done, first and foremost, as you know, through our programs, which include conditionality, and quarterly reviews, and all of that. A final point: on June 15th the board of the IMF discussed and adopted the borrowing modalities, including adequate safeguards for the Fund's balance sheet. And these modalities will be reflected in the borrowing agreements with our members. There was a press release to that effect a couple of weeks ago, giving some more detail on that.

QUESTIONER: First, to follow up to what was just asked, the BRICs and, I guess, some others have always said that their willingness to support the efforts is somewhat conditional, or at least is tied in with the willingness of the organization itself to reform the quota and voice, the representation system. So, is progress that you are seeing commensurate with the increase of responsibilities that the Fund asks from these countries?

MR. RICE: The Fund is a quota-based institution, and we believe it's very important that we continue to make progress on the steps needed for making the quota increases under the 14th Review effective, and complete the 15th Review by January 2014. In terms of the governance reforms and the completion of the 2010 agreement, management of the Fund, and Christine Lagarde in particular, I think has been very clear that she wants to push for as much progress as possible to meet the timeline that has been agreed by the membership, which is, you know, by the time of the Tokyo annual meetings. And that continues to be our determination, to push for that progress.

QUESTIONER: Are any plans being formulated to move beyond that initial stage of reform? Even when I am asking this, and I'm saying "initial stage of reform," I'm not sure that this is how the Fund viewed it. Maybe for the Fund, it was the final stage of reform. So, please clarify that.

MR. RICE: At the moment the objective is completion of the 2010 reform, and to do that, to get as close to that as possible, by the time that was agreed by the membership. I'm not aware of further requests or plans. But there's a clear timetable here for completion of the 2010 reform, by the time of the Annual Meetings, as much as possible. There's the timeline on the review of the quota formula, and then the dates for the next review of the quotas themselves. That timeline is clearly laid out.

QUESTIONER: A question about Ukraine. The authorities met with Mr. Lipton yesterday. Can you bring us up to date on what's happening there? What was discussed, what was agreed, if anything? Is there any progress on the program with the Fund? And last but not least, what's actually -- how do you see what's happening in their economy? What shape the economy is in?

MR. RICE: Yes, Messrs. Kolobov and Lipton met recently and discussed the economic developments in the Ukraine, and the near-term prospects and challenges facing the Ukraine. They also discussed the recent Article IV mission to Ukraine, which was around the end of May – I refer you to that. They also discussed, of course, the status of the Stand-By arrangement. On that topic, I can tell you Mr. Lipton confirmed that actions are necessary to ensure that the program objectives are met, including fiscal consolidation, energy reforms, and financial sector reforms. The review is on hold, pending implementation of the measures agreed for completion of the second review.

Let me take a few questions online, and then I'll come back in the room, and I will come back to you. On Egypt: "Do you see that the time is now right to deal with Egypt?" To which I would say, the election of a new president is an important step forward in Egypt's transition. As we have said before, we stand ready to support Egypt during the transition, and look forward to working closely with the authorities.

QUESTIONER: Could you please give us some modality on the IMF representation in the Cyprus mission? Who is going to participate, when they plan to start the talks, what's the expected duration of the mission?

MR. RICE: As the Managing Director said in a statement yesterday, the IMF has received an invitation to participate in the external financial assistance to contain the risks to the Cypriot economy. This follows the Cypriot authorities' request for financial support from the euro area member states, through the EFSF and the ESM. We stand ready to join the efforts of our European partners to help Cyprus return to stable and sustainable economic growth and a solid financial sector. We expect to send an IMF team to Cyprus to evaluate the situation in the field next week in preparation for discussions on an economic program to help Cyprus address the economic challenges it faces. And this would likely be a mission jointly with our European partners.

In terms of the staffing of that mission, I can tell you that the Mission Chief for Cyprus is Ms. Delia Velculescu.

QUESTIONER: Based on the needs of Cyprus, the stability of Europe, the patience of financial markets and the IMF, do you have an idea of when the memorandum should be signed, in order to safeguard the stability?

MR. RICE: I do not have a timeline on that. The process is as I described it. There will be a team there next week. They will make a fact-finding assessment, and have discussions with the authorities, and with our European partners. And that will prepare the way, then, for discussions of a potential program a bit further down the line. It's just hard to say right now what the specific timeline will be. And I think we should leave it to the joint mission of the EC/ECB/IMF to evaluate the situation, and then come back to us.

QUESTIONER: One final question. Is there an institutionalized restriction to countries that apply for [IMF loans] to seek loans from other countries, like China or Russia.

MR. RICE: Well, you know, it's the authorities' prerogative to seek financial support from, you know, wherever they might deem it useful. So, wouldn't want to go further than that.

QUESTIONER: In Cyprus, would the IMF be responsible for the loan, for the structural and the economic changes, other than the banking stuff?

MR. RICE: We should wait for the team to get on the ground to discuss. I would only refer to the Euro Group statement yesterday, which spoke of the framework of a comprehensive adjustment program for Cyprus. That is framework into which we're entering these discussions.

QUESTIONER: On Egypt, has the IMF been in touch with the new authorities there? Or are you waiting for something specific to happen before, you know, you re-engage?

MR. RICE: I can tell you IMF staff has been in touch with Dr. Morsi's team, and we expect the Managing Director to be in touch shortly. Our contacts are ongoing with all sides.

QUESTIONER: Have they indicated whether they are interested in resuming the negotiations? Or is that off the table?

MR. RICE: I'd only repeat that we look forward to working with the authorities, as we've said before.

QUESTIONER: Can you tell us how much money the Cypriots requested yesterday?

MR. RICE: I don't have a number. Again, sorry to repeat, but the fact-finding mission is going to go out, have those discussions with the authorities and, you know, then there will be a further negotiating mission. And I think it's at that point we would be able to get you some more information in terms of specific numbers, and so on.

Let me go online again, and I'll come back to the room for a final round.

There is a question on Hungary."Has there ever been a formal request by the present Hungarian government lodged with the IMF for any financial support? Can any kind of substantial talks start before such a request is filed?" The request for financial support actually was made by the Hungarian government in November of last year. What I can go on to offer is that we welcome the recent legislative amendments and commitments to strengthen the independence of the central bank, taken by the Hungarian authorities. And just to try and answer the question, once these measures are adopted by parliament, the IMF will be ready to start negotiations on a joint IMF-EU program.

There's one other question online, which I will take, and then come back in the room. It's on Spain. "Can you explain what the role of the IMF in the Spanish bailout will be? Will the IMF be able to stop funds from being disbursed if the right measures are not taken?" As you know, the IMF was asked by the members of the Euro Group to help assess Spain's request to the European partners for financial assistance, and to support its implementation with regular monitoring. In terms of our current role, and in response to that request, the IMF is currently participating as independent technical advisor in the discussions between Spain and its European partners, regarding the terms of the EFSF-ESM financial assistance to the country, and the modalities for monitoring. Looking forward -- as you may have noted from the Euro Group statement yesterday on Spain -- it is expected that Spain will request technical assistance from the IMF. That request has not yet been forthcoming. But that would be, again, in the context of supporting the implementation and monitoring of the European financial assistance.

QUESTIONER: I'm sorry, I don't understand what the "technical assistance" -- is that linked to what the Fund is doing with the banks? Or is it economic monitoring? Is this similar to what Italy asked for, and then, of course nobody took it up?

MR. RICE: Well, first of all, as I said, the Spanish authorities have not yet made that request for technical assistance, but it was referred to in yesterday's Euro Group statement. Specifically, this will be to support the implementation and monitoring of the European financial assistance, which, as you know, is focused on the financial sector. We will be able to tell you more, once the request has been received and assessed.

QUESTIONER: Right, so this isn't anything different from what was originally agreed, to monitor the banking stuff. So this is not a separate technical mission, right?

MR. RICE: It is not separate from the original objective of supporting the monitoring of the financial assistance in the financial sector.

QUESTIONER: Gerry, regarding Cyprus again, may I ask you again, and can you clarify for us, in the event that Cyprus gets these loans from China and Russia, do IMF terms of involvement change?

MR. RICE: Again, I'm sorry to not be able to offer you more, but I think we want to just get on the ground next week, make the assessment -- including of the needs, and including the financial needs. That will be followed, probably, by a negotiating program, and we'll be looking at the overall financing in that context.

QUESTIONER: Is the IMF working against a deadline here, or a timeline, in Cyprus, and Greece, of course.

MR. RICE: As usual we want to assist our member countries as speedily and as effectively as possible. But I don't have a timeline on the assistance.

QUESTIONER: Well, you know, the issue with Greece is that it needs a payment, I believe it's by the end of this month.

MR. RICE: I don't have much more than I said earlier on the financial needs of Greece. I'd just refer to that.Let me go one more time online and come back for just one last question, perhaps, in the room.

This question is on Argentina. "Since last year, the Argentine government has been placing limits on the dollar exchange market, the amount of U.S. dollars Argentine citizens are able to purchase on the country's institutions and also abroad. To the IMF, how could that affect investment and credits?"

What I can say is that the Fund is monitoring the measures adopted by the government on the local for foreign exchange market as well as the requirements prior to the importing of goods and services. There is a question from Italy, Stefania Arcudi, of TM News. "Today and tomorrow are crucial days for the euro zone, in terms of finding solutions for the debt crisis. What outcome does the IMF expect? Do you have any comments on the summit?"

Since the summit is underway as we speak, , I wouldn't want to comment on that right now. What I would say, though, is that we have been very clear, particularly in the concluding statement issued last Thursday on the Euro Area Article IV consultation – on the measures that the IMF sees as being necessary for the euro area to take in the short and medium term, to move towards a more complete monetary union, and overcome the crisis.

One more question online. "There's an impression in Pakistan that the IMF will not approve a new program for Pakistan until the U.S. government gives the green signal. What is your comment?

MR. RICE: In that, I'd just like to say that the Pakistani authorities have actually not requested financial assistance from the Fund. But, of course, the staff remains in an active policy dialogue with Pakistan.

QUESTIONER: A follow-up to the question on the euro zone. My understanding is, normally, these things move from a political union to maybe a fiscal union, then maybe a banking union. But we are not in normal times. So, in times of crisis like now, can this like "normal," or what I assume to be normal, chain of events be reversed? In other words, can the countries in the euro zone try and do a banking union right now, without first going through the previous stages?

MR. RICE: I wouldn't have a view on the phasing of the different elements you've described, Andrei. But, again, I would refer you to what I think is a very succinct and clear concluding statement from the euro area Article IV just a few days ago. It lays out very specifically, in terms of longer-term and short-term measures that the IMF sees as being necessary to complete the monetary union and, in the process, address the crisis effectively.

QUESTIONER: Can you explain me what are the major expectations from the new Greek government? The three major fields that you want to see progress, an immediate progress? And if you agree with those saying that the recession in the country and the high unemployment should be taken into account from the IMF mission, in order to maybe to change or to review again the fiscal adjustment program in the country?

MR. RICE: The first thing I think we'd want to say is that of course the IMF is very concerned about the recession and the high level of unemployment in Greece. And, in fact, that's what we've been working with Greece and with our European partners to help Greece overcome. In terms of going forward in the discussions, you can get the transcript, and you'll see what we said. I'd described it as basically it's one step at a time here. We've got a mission going next week, which I announced earlier, led by Mr. Thomsen. We will have discussions with the new government. That will be followed, we would expect, then, by a negotiating mission. Our priority is to listen to the new government and to hear their views. And the basis for the discussions continues to be the program that has been agreed. But, of course, if the new government has ideas on how those objectives can be achieved, we are open to that discussion -- as we are in all the country programs we support.

In terms of priority -- again, growth, employment, reducing the public debt. I'm sure, you know, these are going to remain major issues for Greece into the future.

QUESTIONER: Following up on the timeline, do the mission, and Mr. Thomsen, have any idea how the implementation of the Greek program is going? Because you have your main resident representative in Athens and I'm sure that he's reporting every day from Athens about the program and the implementation. Did he report any progress lately?

MR. RICE: You're quite right that, of course, we have our res rep on the ground, and we are in, you know, constant touch with the authorities in Greece. That said -- and I think, as you know, undertaking a program mission is a much more elaborate process, it requires a larger team to do the work. In this case -- again, as you well know -- there has been a bit of a hiatus, given the election period in Greece. So the team needs to go out again and assess what has happened in that period, establish the facts, and, then come back, we'll do the analysis, and be in a better position then to proceed.


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