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

September 13, 2012

Washington, D.C.
Thursday, September 13, 2012
Webcast of the press briefing Webcast

MR. RICE: Good morning, everyone, and welcome to this briefing from the IMF. I am Gerry Rice of the External Relations Department. It's nice to see everyone this morning in the room. And welcome also to our friends online. As usual, this briefing will be embargoed until 10:30 a.m. Washington time. Also as usual let me begin with a few very b brief announcements and then we'll move to your questions in the room and online. In terms of the Managing Director Christine Lagarde, tomorrow, that's the 14th, the Managing Director will be in Nicosia, Cyprus, to attend the Euro Group meeting that will take place there. Looking at bit further ahead just as something for you to take note, on Monday, September 24, ahead of the 2012 Annual Meetings of the Fund and the Bank in Tokyo, Christine Lagarde will be making a curtain raiser speech at the Peterson Institute for International Economics here in Washington. That's Monday, September 24. Stepping back from the 24th to the 21st, on Friday the 21st, in New York City, Christine Lagarde will be introducing Aung San Suu Kyi who will be receiving the Atlantic Council's Global Citizen Award. Again, the Managing Director will be making the introduction there. One last thing. Tomorrow as you may know, here at the Fund the IMF's Research Department will hold a conference on Financial Crises: Causes, Consequences and Policy Responses. We will have a number of leading economists in the field at that event tomorrow here at the Fund. Olivier Blanchard, our Chief Economist, will obviously be leading the discussion. I can also tell you that our First Deputy Managing Director David Lipton will open the conference with some remarks.

With that, let me turn to the room and any questions that you may have this morning.

SPEAKER: Good morning. I know that you cannot say much because of the ongoing negotiations in Athens, but I need to ask you this. According to the Greek press and international press, the Troika demanded from the government of Greece to introduce a 6-day working week as part of the terms of the bailout. Is it true that they're asking this?

MR. RICE: As you say, the mission is in the field. The discussions began last week, so it would be premature to get into discussions of the details. I think what I would say is that the government is making strong efforts to identify fair and balanced measures. The Fund is working to support the government in that effort, working also with our partners the European Commission and the European Central Bank. The objective is to get the program back on track, and beyond that of course the objective is to help Greece get back on the path of sustainable growth and jobs and put the public finances on a stable footing.

SPEAKER: A follow-up -- some economists came to the conclusion that there is no government in Greece that can implement these measures. What is it that makes you believe that Greece can't implement the program and especially these measures? And also because there are conflicting reports on the 2 years' extension that -- is asking the Troika, can you tell us what is the position of the IMF on this issue on the extension?

MR. RICE: Regarding the government's effort, as I said , I think our view is that the government is making strong efforts to identify what is required in terms of measures to get the program back on track and we are working as hard as we can to support that effort. On the other part of your question about the extension, you may recall that in our staff report for the extended financing facility back in March that we said there are good arguments to extend the period for Greece to implement its fiscal adjustment. However, and this was a very important part of that statement, we said that such an extension would be dependent on the availability of financing. And just to remind that under that EFF, that extended financing facility, that Fund already has a 4-year arrangement with Greece which is the maximum allowed under the Fund's rules and regulations.

SPEAKER: Good morning. If I can follow-up on Greece. In the first bailout, the IMF had a change of opinion on whether there should be any debt restructuring as part of the deal. First it said it should and then Europe said we don't want it so the Fund backed down, and then later after many months of asking about it, the Fund finally admitted that, yes, actually debt restructuring is a good idea. I'm wondering if there has been a similar evolution of thought on official sector debt restructuring for Greece? Is that on the table and is that something the Fund thinks would be beneficial to both Greece and the Euro Zone?

MR. RICE: The Fund always tries to be pragmatic and to meet the needs of our members as circumstances evolve. What we always seek in all our programs and for this program to move forward in terms of your specific question is two things. We need to be assured of debt sustainability, and we need to be assured that the financing is in place. As to how those requirements are fulfilled, again it depends on the circumstances facing each country, each program. And again trying to respond to your specific question, in this case I think we have to wait and see now that the discussions are ongoing to see what the conclusions of that mission would be.

SPEAKER: May I ask a follow-up question on Italy? The ECB's announced program of bond purchases will only focus on the short-term maturities, but one of the things that has been keeping Italian yields at least somewhat moderated is the fact that the bulk of their debt doesn't mature for an average of 7 years. If the ECB is purchasing short-dated bonds for Italy, doesn't that increase the vulnerability of Italy to speculation and is exposure to markets?

MR. RICE: I wouldn't speculate on the speculation, but maybe say a couple of things. One, the IMF is on record as last week supporting the recent steps announced by the European Central Bank, and we have also said that we're willing and ready to support that effort in the context of our existing frameworks. The second thing I can say on Italy is that Italy has taken a set of strong measures. I think what's important now is those measures be implemented and supported in a way that the government of Italy would deem to be appropriate including whatever support that might entail from the European Central Bank and others.

SPEAKER: Can you say anything about the meeting Madam Lagarde will have tonight with the President of Cyprus, Mr. Christofias?

MR. RICE: Not much except to confirm that as you say, Madam Lagarde will meet with President Christofias tonight in advance of the Euro Group meeting tomorrow. You can imagine that the topics to be discussed will include economic developments in Cyprus and of course the developments in the Euro Zone which have an impact on Cyprus. Beyond that, I don't have a great deal for you.

SPEAKER: Do we have anything new on the status of the negotiations between the Troika and the government of Cyprus?

MR. RICE: Just that there was a mission in July and there were productive discussions. Those discussions have been continuing as I think I mentioned a few weeks ago via teleconferencing actually the discussions have been ongoing. So they continue to be constructive and move forward. And as I say, there will be the discussion tonight between the Managing Director and the President of Cyprus.

SPEAKER: If I may, yesterday there was leaked on a website in Cyprus that the full text of the proposals of the Troika for the government of Cyprus. Do you have any comment on that?

MR. RICE: I haven't seen that so that I wouldn't be able to comment on that.

Let me turn to online questions. There is a question from Egypt "Has the IMF asked the Egyptian government to devalue the pound against foreign currencies as part of program conditions?" I think what I'd say is that it would be premature for me to discuss conditions or measures of a possible program because the mission and the discussions have yet to take place. But what I can say is that in general the Fund would like to support a home-grown program in Egypt that addresses the economic and the social challenges that Egypt is facing. And I can also say that we expect a mission to travel to Egypt before the end of this month. Since I'm online, let me take a question on Argentina "Did the IMF receive in the last weeks any information from Argentina regarding the obligation of submitting data required under Article VIII? At this point is there any possibility for Argentina to receive a declaration of censure at the next board meeting?" As you may know, the Managing Director will brief the board on Argentina on this coming Monday so it would not be appropriate for me to get ahead of that in terms of what the board's decision might be. But I can say that the ongoing process follows interactions with the authorities and the proper due diligence to assess the quality of the statistics and their alignment with international guidelines as well as the country's obligations under the Articles of Agreement. So bottom line, we're following very much the established procedure here in terms of taking this forward, and as I say, there will be a board meeting on Monday is let's wait for that, and that's about as much as I can say. One more question online and then I will come back inside the room. It's on Hungary. "Hungarian Prime Minister Orban recently said that the IMF set strict conditions for the start of the formal negotiations. Could you make those conditions public? Have you set a date for the start of the negotiations? And will you speak of a loaner or precautionary credit line? There is no date for the new visit to Budapest. As you know, there was a mission there in late July to begin the program discussions and they had a set of talks. That dialogue is continuing. In terms of the conditions, I don't have the details at this stage, but I think it's useful to look at the press release which was issued I believe around July 26 because it sets the general direction of the policies and that may be the most useful thing to look at at this point in terms of Hungary.

SPEAKER: I would like to follow-up on Hungary because the Hungarian prime minister strongly rejected the conditions posed by the IMF on his Facebook page, and I wanted to know if it was a matter of concern for the Fund.

MR. RICE: I don't have much to add beyond what I said. It would be premature to discuss the conditions because the negotiations are ongoing. And again, I think in terms of the general direction, the best guidance I can give you is the press release that we issued.

SPEAKER: I'm sorry. I was not talking about the conditions, but I was talking about the reaction of the prime minister and I wanted to know if it was a matter of concern for the Fund.

MR. RICE: Again our position is that discussions continue. We will be aiming to be as constructive and helpful as possible and let's just see where they go from here.

SPEAKER: Many times the IMF has declared it wants fair and balanced measures and that these measures that the Troika is going to provoke in Athens and Greece extreme tensions in the Greek society. Yesterday for the first time in Athens, Poul Thomsen was booed by police officers. Furthermore, all of this tension benefits the extremists. The majority of public opinion claims that these measures are going to destroy the Greek society and maybe the government. Don't you have any comment to make for these incidents and these reactions?

MR. RICE: We have said before and I'll repeat that we have the greatest respect for the efforts that the Greek government and the Greek people are making to overcome this crisis and I can assure you that the IMF is doing its utmost to support Greece and the Greek people in those efforts. Our objective is clear. We are looking to work with Greece to get back on the path to sustainable growth, to get employment back, and to do that in a way that is as fair and in a way that the burden of adjustment is shared in a fair way. It's an extremely difficult situation. Nobody is pretending or would try to say that it is otherwise. But we see ourselves as a partner with Greece in this effort and I think if you look at the level of financing that the IMF has been providing in this program amongst other things, I think it is an indication of the level of commitment and support that the IMF has made to Greece.

SPEAKER: You may be aware of Fred Bergsten’s piece in the “Financial Times" in which they say that our analysis suggested that the combined trade balances of countries -- pursuing foreign currency intervention are 1 trillion higher as a result of these interventions" -- Japan, Switzerland, China they say there has been moderation and in a number of other countries. And that was greatly weighing on global imbalances and growth. And they say, "The rules of both the International Monetary Fund and the World Trade Organization forbid currency manipulation to maintain trade surpluses and these should be implemented at long last," calling for the IMF to actually act on the currency interventions. How do you respond to this criticism and these requests for the IMF to –

MR. RICE: Thank you. As you know, the IMF continuously reviews exchange rate developments. We do this in a number of ways. We provide assessments of exchange rate from a medium-term perspective for each member economy through the regular Article IVs that we conduct with each and every member country. So we do that at the country level and at the bilateral level. We also do it at the multilateral level through for example the World Economic Outlook. These exchange rate assessments done on a regular basis are published so that this is done in a very transparent way.

At the same time, our members, their obligations regarding exchange rate policies are very clearly spelled out in the Articles of Agreement. I think I'd like to add in this context and as you say be aware, we communicated just recently the adoption of a new decision on surveillance, the integrated surveillance decision, that will being together the spectrum of our bilateral and multilateral efforts in this area. The implementation of that decision will begin in January next year. We think it will lead to a significant strengthening of our surveillance efforts including exchange rate assessments.

MR. TALLEY: I guess you're saying that the Fund's current assessments at this point don't show that the interventions that have built up this 1 trillion in foreign currency purchases are negatively impacting the global economy enough for the IMF to use its anti-currency manipulation –

MR. RICE: I've just described the process and assessing exchange rates is a key part of the IMF's job. We believe we are doing our job. In terms of others' assessments of numbers and countries' exchange rate policies, we don't comment on those. We have our own assessment of exchange rate policies, and as of now just to directly answer your question, the IMF has not found that any member is manipulating its exchange rate.

SPEAKER: Do you have some comments on the recent quantitative easing moves from the U.S. Federal Reserve, ECB and other advanced countries on the positive side those huge amounts of liquidity can buy some time for tough structural and fiscal reforms. But on the flip side, will that increase the reform -- for those tough reforms? Thank you.

MR. RICE: As you say I think the role of monetary policy has been key in terms of supporting the global recovery which to this point has been described by us as tepid. We believe steps taken by the ECB and the U.S. Fed among others have been appropriate and again have been playing a very important role in terms of getting the world back to the path of growth which is really the goal. It's what we're all trying to do. Monetary policy of course is not the only element. There are other important areas obviously. And I think on this whole question is something that will be surfacing again obviously in the context of the upcoming World Economic Outlook to be published in several weeks' time and I think will be revisiting these issues including the whole question of the path to growth and the policy issues involved in that.

SPEAKER: Good morning. There is an interview that was just published from the Greek Executive Director of the IMF that seems to be creating a little bit of a stir where he said that Greece is going to need a third program and that the European creditors will have to find the money for it. I think it's a good opportunity for the IMF to say something even if I know it's still [recent] that this will require additional financing and it will be official sector involvement for additional loans.

MR. RICE: I honestly haven't seen the article to which you're referring, and I probably can't do much more than revert back to what I said to Michael earlier which is in any program we're looking at two things, the debt sustainability and the financing assurance. The discussions in Athens going on right now are focused on how we can get there, and speculating beyond that is probably not very productive at this point. Let's wait for the discussions. And again, I simply have not seen the article to which you refer.

SPEAKER: Just so that we're clear, the talks right now are to get the second program back on track? We're not talking about a third program?

MR. RICE: We're talking about getting the current program back on track. Correct.

SPEAKER: I need to try again on the 6-day working week if I may because it's a very important issue not only for Greece but I'm sure for the workers all over the world. Does anyone in this building believe that workers not only in Greece but in the world that they have to work 6 days a week? Is it a policy by the IMF?

MR. RICE: There is no policy by the IMF in that regard, Michael. What we have said is in the context of Greece and more broadly that we see unemployment, we see jobs as a major issue for the global economy. We are deeply concerned about the levels of unemployment in Greece and in many other countries and the programs that we are undertaking including labor market reforms in many countries are aimed at increasing employment and that's the IMF's policy actually, to increase employment.

Let me go back online because there is a question about Spain "Do you foresee a new IMF mission to Spain anytime soon? To what extent this mission would consider the economic impact of an eventual secession from its richest autonomous region?" We do not have plans for a mission to Spain anytime soon. And I think the question of the economy impact of the autonomous regions is really a matter for the Spanish government, and I don't really have much more beyond that in terms of the specifics of Catalonia.

There is another question online which is relating to the Dominican Republic, "Will the IMF deal with the impact of the Euro Zone crisis in Latin America during the Annual Meetings? Will an IMF agreement with the Dominican Republic require the application of a strong fiscal adjustment?" I think I can say for sure that the impact of the Euro Zone crisis in Latin America will be a topic discussed during the Annual Meetings including in our original briefing that will take place on Latin America during the Annual Meetings.

On the Dominican Republic, I can say that as our mission chief stated earlier this week in Santo Domingo, the mission is currently taking stock of recent economic developments in view of preparing the ground for post-program monitoring and Article IV discussions. We do not have a program at the moment with the Dominican Republic.

The authorities have indicated that the Article IV report could serve as a basis for further talks on an eventual program. And of course just to try and respond to the question a bit more directly, the mission will be looking at issues of the Dominican Republic's fiscal and external situation as well as the overall growth scenario during the mission.

SPEAKER: They said that there is a serious disagreement between the IMF and Europeans for the new measures. I would like to ask does the IMF agree with all the measures that have been proposed?

MR. RICE: Again I'm not in a position to discuss measures because the measures are being negotiated, being discussed at the moment in Athens. But again, just to try and respond to your question, we work very collaboratively with the European Commission and the European Central Bank, our partners in the Greece program, and that relationship continues to be very constructive and collaborative. It's working well.

SPEAKER: But part of these measures especially in the labor market as Michael said conflict with European legislation. How can you suggest this when it goes against European legislation –

MR. RICE: I hear you, but I don't know the specific measures that you're talking about.

SPEAKER: On the labor market.

MR. RICE: I haven't been discussing specific measures yet because I can't because that's what they're doing in Athens as we speak and it wouldn't be appropriate and it would be premature for me to really get into it, so I really can't say very much beyond that.

With that let me thank you for coming today. Thank you for your questions, those in the room, those online. We'll see you in a couple of weeks' time and no doubt in the interim. Thank you very much.


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