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

August 30, 2012

Washington, D.C.
Thursday, August 30, 2012
Webcast of the press briefing Webcast

MR. RICE: Good morning, everyone, and welcome to this press briefing on behalf of the IMF. Nice to welcome everyone back after the summer break. As usual, this briefing will be embargoed until 10:30 a.m. Washington time.

Let me begin this morning as customary with some upcoming events, management travel at the IMF, and then be happy to turn to your questions.

First, the Managing Director, Christine Lagarde, will be traveling to Vladivostok, Russia, on September 8 and 9.for the Asia-Pacific Economic Cooperation Leaders Meeting.

Our First Deputy Managing Director, David Lipton, will be participating in the Jackson Hole Symposium in Wyoming, U.S., and that is tomorrow and Saturday. Mr. Lipton will also be then traveling to Switzerland for a constituency meeting and for a meeting of Central Bank governors at the Bank for International Settlements, the BIS. Finally, and in preparation for the Annual Meetings upcoming in October, he will be taking part in a meeting of the International Monetary and Financial Committee Deputies in Paris, on September 11 and 12.

Our Deputy Managing Director, Min Zhu, will be at the Caribbean Economic Forum next week being held in Port of Spain, Trinidad and Tobago. There will be a press conference there on September 5t.

And finally, just to remind colleagues here in the room and colleagues online that press registration for the Annual Meetings in Tokyo is open on our website. We invite you to register as soon as possible. A reminder: The Annual Meetings this year are October 9 to 14.

And with that, let me turn to your questions.

QUESTION: W to ask you about the next steps of the mission, if you can tell us when Mr. Thomsen and his team are going to Greece. How many days will he stay there? And also, if you can tell us when you expect the report of the mission?

MR. RICE: The mission will go back to Athens next week, probably around the middle of next week. As you know, it’s returning with a view to complete the first review of the current economic program. On the length of the mission stay, that really will depend on the discussions, progress on the discussions, and so I do not have a date on that. In terms of our report, the process is, as usual, that when we have completed the discussions, the conditions for the completion of the review have fallen into place, we will make a report to our Executive Board and have a discussion at the Board, and then we will release the report as we always do to the public. Again, I don’t have a specific date for you this morning on that. And again, as usual, our European partners would also do much the same thing, that is they separately make their report to their management on the findings of the review.

QUESTION: Yesterday, Madam Lagarde, according to the Greek government, called Mr. Samaras. My question is why she felt the need to call the prime minister of Greece. Are there any problems? And if you have a readout of the conversation.

MR. RICE: We confirmed yesterday that indeed that conversation between the Managing Director and the Prime Minister did take place. As we said, they discussed the current economic situation in Greece and developments in the euro area. I don’t have much for you beyond that in terms of the details of what was a private conversation. Perhaps just to say it’s not unusual for the MD to confer with member countries’ leaders and senior officials.

QUESTION: What exactly is the mission going to be looking at specifically in this review? This is not a normal review. This is a review under a new government, a country that’s reaching another stage of its program. What exactly is the mission going to be honing in on this one? What are the important aspects of this review?

MR. RICE: The main issues are fairly well known in terms of the measures that need to be agreed and then implemented to return Greece to the path of sustainable growth and employment, to reduce the deficit, and to put in place the structural measures that are needed to, as I say, get growth and employment back. The details will be part of the mission discussions. I don’t really have the specifics for you this morning.

QUESTION: Madame Lagarde is always pressed on the implementation of the program. Is her feeling that she’d like to see some efforts done as the review is going on? You know, what is the measure where the IMF says we’re unprepared to continue our engagement with this country and to satisfy the Europeans, of course? I mean, is she satisfied that implementation is taking place?

MR. RICE: Clearly the IMF is supporting Greece, has been supporting Greece, and continues to support Greece in its efforts to overcome the economic crisis. And that’s, again, precisely what the mission will be discussing with the Greek authorities next week about how best to design and implement what needs to be done. –We believe the government is working hard to identify measures that are effective, that will be fair and balanced and fulfill the adjustment needs. But, again, it would be premature to go into the details of that, as the mission goes into the field next week.

QUESTION: There has been much talk about Spain’s potential need for a sovereign bailout request. As part of the conditionality that the ECB has talked about in terms of any bond-buying program there has to be a request. Wondering if the IMF believes that Spain should make that request for a sovereign bailout, if it needs that request. And then secondly, the Bundesbank, and Germany in general, has been opposed to the type of action that the ECB has discussed. And I’m wondering if the IMF can speak truth to power and say whether Germany’s and the Bundesbank’s role right now in the euro zone is helpful or a hindrance to the future there.

MR. RICE: On Spain, I think it’s a matter for the Spanish government, obviously, as to whether they might request a program or, you know, financing. What I can tell you from the IMF standpoint is that Spain has not requested IMF financial support. We are not working on any plan in this regard. And as you know, we have said before that we think the Spanish authorities have been taking wide and strong reform measures, and the key now is implementation.

QUESTION: If I may follow up on Spain. I understand that it’s up to Spain to request, but the IMF does recommend to countries before requests whether they think that a sovereign bailout would be helpful and whether a country needs a sovereign bailout. I know the IMF has been particularly concerned about volatile bond rates in Spain, sovereign bond rates, and the need for the ECB to help bring down those rates. So given both that issue and the IMF’s understanding of Spain’s needs and implementation of measures, et cetera, surely you have some understanding of whether there is a need or not for Spain to make the -- need a bailout.

MR. RICE: Again, I really would just want to speak for the IMF on that point and say there’s been no request for financial assistance from Spain to the IMF. We’re not working on a plan for financial assistance. What I would say on your broader point, again, without going into detail, that clearly Spain’s prospects would also be helped, in addition to the measures that Spain is undertaking itself, Spain would be helped by further progress at the European level. And again, in terms of whether European assistance, financial assistance, should be used or not, that’s a matter for the Spanish authorities.

Can I just mention to my team that online questions are not showing up for me? So I just want to -- in case colleagues online are asking questions. I’m not able to see those at the moment if something can be done about that.

QUESTION: You were about to answer my second question about the Bundesbank and Germany’s role, hindrance or help?

MR. RICE: I think I wouldn’t go beyond what I said, which is the broad statement that we think Spain’s prospects would be helped by further progress at the European level, but I wouldn’t want to comment on, you know, Bundesbank policy.

QUESTION: As you know, the U.S. hasn’t ratified yet to ongoing reforms at the IMF about the quotas and the governance. I wanted to know if it was a matter of concern within the IMF.

MR. RICE: On the quota invoice, I think what I’d like to say is that we think significant progress has been made toward implementing the 2010 quota and governance reform, and we are urging all countries who have not approved that reform to complete the necessary steps quickly. There is a website on which gives an up-to-date status report on which countries have completed the reform at this point. On individual countries, this is, of course, a matter for the membership, as you imply. And I think on individual countries it’s really best to take up the matter directly with them.

QUESTION: But do you know that if the U.S. does not ratify the (inaudible) that they won’t enter into obligations? So that must be like some kind of concern within the IMF given the presidential election here in the U.S. I mean, is there some kind of specific worries about the U.S.?

MR. RICE: Well, again, our goal is to ensure that we make as much progress as is possible by the time of the Annual Meetings in Tokyo. Our management is pushing as hard as they can in that regard. And again, if you look at the progress that’s being made so far in terms of the number of countries that have already approved the reform, it’s really quite significant and, in fact, probably faster progress is being made on this reform than in previous reforms. And again, we’re pushing -- we continue to push as hard as we can.

QUESTION: If I might follow up on Greece. Has there been any evolution of IMF thought on the need for official sector restructuring of Greek debt at all, particularly since you’re saying that you need to see -- the program is to return Greece to growth? And the debt-to-GDP levels, even under the worst-case scenario, in the -- I think it was the March or April DSA, which now Greece in terms of growth is surpassing in a negative way, shows that the debt-to-GDP ratio is unsustainable. So just to reiterate, has there been any evolution of IMF thought on any need for OSI?

MR. RICE: Let me tie this now that I can see online to a question that’s also asking pretty much the same question, what should be the role of the official sector involvement in helping Greece reduce its debt? And I think on that, as you know, that the Fund always requires that for a program to move forward, the debt must be sustainable, the financing assurances must be in place, so we need both of those things. Now, as to how those requirements will be fulfilled in the context of the current review, I think really we need to wait and see what the conclusions of the mission are on both of those aspects.

Let me take a couple of questions online. There are some questions on Hungary: do you have a time schedule to continue talks? Do you have points on the agenda that you could share with us?

On Hungary, perhaps just to back up, as colleagues may know a joint IMF-European Commission team was in Budapest in late July to begin program discussions. There were constructive talks with the authorities. That dialogue is now continuing. Conclusion of those discussions will require agreement on specific policies in a number of areas, including on balanced and sustainable measures to achieve the planned fiscal consolidation and structural reforms to support higher potential growth.

We do not have a date for the next visit to Budapest. We are in touch with the Hungarian authorities and with our European partners on those issues that were discussed in July. And there was actually a fairly lengthy press release that we put out just toward the end of July, which I would refer you to, also.

Let me take one more question online. It goes back to Greece and introduces Portugal: when will the IMF and the EU release the next Troika Commission reports on Greece and Portugal? I already answered on Greece.

On Portugal, there is actually a mission in the field for the next review. We can anticipate that will be ongoing over the next couple of weeks. And at that point, as is the same with Greece, we would be submitting a report to our Board and then releasing that report publicly. The EC separately has its own procedures on that. Let me just mention in the context of Portugal that the Article IV mission is also ongoing at the same time.

QUESTION: Gerry, according to everybody almost in Greece, the new measures are unbearable. What makes you think or believe that the new government in Greece can implement these measures?

MR. RICE: I think that will be one of the issues to be discussed during the mission. We certainly -- as I have said here before, the IMF respects very much the efforts that the Greek people have been making in the midst of this crisis. One of the challenges, indeed, will be the implementation of the measures needed to overcome the crisis and to ensure that these are done in a fair and a balanced way and, as we have said before, in a way that helps to protect the most vulnerable groups in Greece. So indeed, that’s a major challenge and we see that as a major challenge.

QUESTION: Also just a quick follow-up on Spain. You said that it was important that Spain be helped by progress at the European level. I was wondering if the MD had conversations in the last week or so with the European leaders on this. I know she’s going to Russia, but has that conversation been taking place? And what kinds of things is the IMF pushing Europe to do? I mean, we’ve got a big ECB meeting coming up next week. What would you like to see over the next few months since this is kind of the next phase of the euro crisis?

MR. RICE: You know, Christine Lagarde is in contact with European leaders on an ongoing basis. In terms of what we would be advising, proposing that the European should do, I think the single best thing I can say is to take a look at the Euro Area Article IV that we released in July. I think it’s a very clear statement of where the IMF stands and what the IMF thinks in terms of what needs to be done at the European level. It includes issues of banking union and stronger fiscal integration as well as, of course, the need for the individual countries themselves to continue with the reforms that are required to overcome the crisis.

QUESTION: –The markets believed ECB President Draghi when he said that he’ll do what it takes to save the euro zone. So that for now has placated the markets, but that won’t last forever. I mean, the markets are going to come back to this if they don’t act soon. So I was asking what is the IMF doing to push or to suggest to the Europeans to act, you know, now and to do it, you know, pretty quickly.

MR. RICE: Well, again, I’d want to go back to the Article IV , it’s really a very clear exposition of what we think needs to be done.

Perhaps on the ECB itself, we certainly support the interest rate reduction with the decision of last month. But with inflationary pressures expected to weaken, we believe there is room for more accommodative monetary policy. As you say, the ECB has signaled its willingness to engage in bond purchases and non-standard operations once the EFSF and the ESM is engaged. And we look forward to the ECB’s further guidance in terms of defining the modalities of its commitment to this further unconventional support.

Since there appears to have been a lag in the online questions let me just take another one. There is a question on Egypt: when will the IMF team be returning to Cairo? What can you tell us about their plans? What’s the main goal? When will we learn more about terms and conditions of the loan?

Just a reminder that, of course, the Managing Director, Christine Lagarde, was in Egypt just several days ago last week. She said then and I can repeat that we stand ready to support Egypt that we look forward to working closely with the authorities. The IMF mission is expected to arrive in Egypt in about two weeks’ time to resume the negotiations on possible financial support from the Fund for Egypt’s economic program. It would be premature to get into issues of terms and conditions, obviously. But as we have said before, we’d like to be supporting a program that takes into account Egypt’s economic and social challenges, a program that’s homegrown, a program that’s fully owned by the government of Egypt and for which there is a critical mass of support. So again, that mission will be expected to be there in about two weeks’ time.

QUESTION: The Euro Group has a meeting coming up in the middle of September, and I’m wondering what specifically the IMF is looking -- thinks is necessary progress. And I know you pointed to the euro area Article IV. There are some specific measures that are recommended, but there’s not a specific timeline. And given that time has been of essence here, I’m asking what the IMF believes is the premium next step.

MR. RICE: I know you would love for me to give you a timeline. I don’t have one for you. Urgency is obviously of great importance. I think in our communications, including in that Article IV that you mentioned, the tone of urgency was there. I think there’s a sense of priority there, also, in terms of the measures. But, today I don’t have a further timeline or a descending order of importance for you.

QUESTION: So just to be clear -- and I wasn’t looking for a timeline. I was looking more for what specific actions IMF was looking for in the next month. The IMF does not -- the IMF cannot say at this point in time what it believes Europe needs to do immediately?

MR. RICE: Again, beyond what we’ve said in the Article IV, which includes priority issues of banking union, fiscal integration, and, of course, the countries themselves taking the measures that are required to get back on the path of growth and sustainability. No, I don’t have that kind of details for you today.

I’m going to make this the last question.

QUESTION: I wanted to touch the issue of Cyprus and the negotiations with the IMF. What is the status of these discussions? Because it seems to many people, that the talks have frozen. And also, I wanted to ask you: is it bothering you here at the IMF that the government of Cyprus at the same time is negotiating with the Russians and the Chinese?

MR. RICE: Perhaps just to back up a bit, as you may recall a mission initiating discussions on a possible IMF program took place in late July. The mission made progress on defining policies that could form the basis of a program. And since then, what I can tell you is that the discussions with the authorities have been ongoing via teleconference and the timetable for the next mission will depend on progress with this dialogue. In terms of the government’s discussions with other countries, with other potential lenders, financiers, et cetera, that’s, of course, entirely a matter for the government and that’s their prerogative.

So let me wrap it up here and thank you for coming. Wish you well to any of you who have the pleasant task of going off to Jackson Hole this weekend. And we’ll see you in a couple of weeks’ time, if not beforehand. Thanks again.

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