Transcript of a Press Briefing by Caroline Atkinson, Director of External Relations, International Monetary Fund

September 24, 2010

Washington, DC
September 23, 2010
Webcast of the press briefing Webcast

MS. ATKINSON: Good morning. I apologize, first of all, for the delay in this briefing, which was due to technological problems that we had with our online Media Briefing Center. And thank you very much, for those of you online and in the room. Because of the delay in beginning, we will also delay the embargo to 11:00 a.m., or 1500 GMT for this briefing.

This is just the regular bi-weekly briefing. And I’ll begin quickly with telling you about some management travel. Managing Director Dominique Strauss-Kahn will be going next week to Kiev and Yalta for discussions with the Ukraine authorities, and to participate in the Yalta Economic Strategy Conference. There will be a press conference and a press release at the conclusion of that visit, we expect.

The First Deputy Managing Director, John Lipsky, is traveling to Asia for some closed events over this weekend, but will then be in New York on Monday, and will be making a speech at the Depository Trust and Clearing Corp. in New York City, which we will be posting online.

And Deputy Managing Director Mr. Shinohara will be in Kuala Lumpur at the World Capital Market Symposium on Monday also, and will be making a speech that we expect to post.

Now, next week, of course, begins the crush of run-up of the meetings ahead of our Annual Meetings calendar. We do expect the Annual Meetings to be rather different this year, as I’ve mentioned before. But some things will stay the same.

So next week we will begin with the analytical chapters of the Global Financial Stability Report. Those will be released on next Wednesday, September the 29th. The World Economic Outlook analytical chapters will be released the following day, on Thursday, September the 30th.

The following week we will release the full, the main starting chapters of both documents. Mr. Viñals, the Director of the Fund’s Monetary and Capital Markets Department, and Financial Counselor, will present the Global Financial Stability Report on October the 5th at 9:00 a.m. And Olivier Blanchard, Economic Counselor, will present the main forecasts of the World Economic Outlook on October the 6th.

For all of those events, the Media Relations Division will be sending you a media advisory and advising you about documents being posted under embargo, which we expect to do. Then on October the 7th, the Managing Director will have his opening press conference, which will be here, for highlighting the main items in the Annual Meetings agenda.

The Annual Meetings themselves start on October the 8th, and they begin this year with a plenary session that will be open. And that was the gathering, if you like, of the Fund and the World Bank’s shareholders. There will be major speeches from the Managing Director and, of course, the World Bank President.

Then the following day, there will be the meeting of the Steering Committee of the IMF, the International Monetary and Financial Committee, and there will be a number of other meetings. I’ll just mention a couple. On October the 10th, the IMF’s Regional Advisory Groups will hold their first joint meeting together in Washington with the Managing Director. We will be issuing a press release describing that, and we will have a web page describing those Regional Advisory Groups, which is really something that we’ve begun in the last year, to reach out to senior—different people in the different regions of the Fund to tap their advice about the challenges that the regions and that the global economy faces.

Also on Sunday, Mohamed El-Erian, the Chief Executive Officer of PIMCO, will deliver the Per Jacobsson lecture on “Navigating the New Normal: The What, How and Why for Policies and Markets.” That’s another open event that will be held along the street. So we have an Annual Meetings page on our website that lists all of these events. Many of the seminars that we have, including one that will be hosted by the BBC on the Friday, October the 8th, with the Managing Director, will be open to press as well as to others—and I encourage you to look that up, look up the program of seminars.

I will turn now to your questions. We have some online, and some in the room. I’ll start, as usual, with the room, if you have any questions here.

QUESTION: I have several. We’re starting to see record spreads in Europe, on Ireland, on Portugal, compared with German bonds, and there’s a lot of pressure for investors and, you know, concerns that they could force these countries to seek bailouts. Now, I’m going to ask you, if Portugal and Ireland went to the IMF for help, but also would like to see whether you think there’s an overreaction by markets, and what these countries you think can do to avoid the situation?

MS. ATKINSON: Thank you. Well, there have been no requests for financing support or any special requests to the IMF, so that answers that question. On the situation more generally, we have noted that a number of countries in Europe, and then the EU as a whole, have announced and made important steps towards fiscal measures that call for earlier consolidation than had been planned, that really address their medium-term fiscal issues. And we believe the important thing to focus on, going forward, is the implementation of these reforms, along with structural reforms and financial sector reforms to promote growth over the medium term. And that’s really our focus, and the focus, we believe, of these governments. And that process is already underway.

QUESTION: Just to clarify—do you think, so, the markets are acting irrational, like we’ve seen them in the past? Or why –

MS. ATKINSON: I’m not going to comment on market movements. I know that they vary. If you look at the period of time, you will see markets moving up and markets moving down. I think what’s important is the fundamental changes. We’ve seen fundamental changes in governments’ policies and announcements. What’s important is to implement those fiscal plans going forward—and also the structural reform plans going forward.

Perhaps it makes sense to take a question online. This is about the Irish economy. It says, “The Irish economy contracted by 1.2 percent in quarter two. The IMF has said that the government may struggle to meet its goal of reducing the budget deficit. Does this contraction exacerbate that problem? And it raises the question of whether austerity is appropriate now.”

So, maybe just dealing first with the GDP numbers. And, indeed, the second-quarter GDP number did show a contraction. But you may know that, or you may remember that in the first quarter there was a rather strong figure, and one mustn’t read too much into quarterly movements. Our detailed analysis of the economy, which was available after the Mission and the Board Meeting in July, indeed pointed out that sometimes after a sharp increase such as took place in the first quarter, on a quarterly basis you can sometimes have another, a following quarter that takes away some of that. And our expectation at that time was that with Ireland having begun rather earlier in fiscal consolidation that the economy would begin to recover later this year.

We do believe that the fiscal measures that the government has announced and is implementing and is discussing in its budget are appropriate and the right thing to do, given the financing and fiscal pressures in Ireland. Of course, as I said, the growth side is also important, and that will be—we do expect recovery to begin. And we do expect that measures will be put in place to support that going forward.

I have another question online: “Did the Portuguese government and the IMF have any contacts regarding an eventual intervention of the Fund in Portugal?” And, “Portuguese 10-year bond yields are above 6 percent now. Is there an acceptable limit to call for an intervention of the IMF?”

And just to repeat that we have no special requests from Portugal. We have normal relations with Portugal. What’s important is that the government there has announced its commitment to reach the 3 percent target for its fiscal deficit in relation to GDP by 2013—which is the goal in the Stability and Growth Pact, that it’s implementing measures to reach that goal. We support that goal. We also believe that we will be having our detailed discussions with the authorities in early 2011 when we have the Article IV consultation. And, of course, in the meantime we maintain contacts with all of our authorities. I don’t believe there’s a trigger for market rates that leads to intervention. Portugal is taking the measures that they have committed t o in order to reach those fiscal goals.

There is another question “Is the IMF worried about the current situation in the European sovereign debt markets?” And, again, he points to a couple of countries. And, again, on Europe, what’s critical is that there should be this combination of governance reforms, fiscal measures in the countries that have been under financing pressures—those are all well entrain—and that there should be, simultaneously and look forward, the kind of structural reforms and financial sector reforms needed to bring stability and growth.

And on the arrangements for fiscal governments, you know the Managing Director was at a meeting last week in Brussels. He gave an interesting speech about the steps towards reforming EU governance measures. And that is on our website. So are there other questions? Yes.

QUESTION: I’m changing continents.


QUESTION: Japan. Interesting intervention on the yen. I don’t know when it was—it was two weeks ago, now. Do you think, in the light of all global imbalances, and all the discussions, and since the IMF is helping the G-20 on re-balancing growth—was it a justified move? Is the yen overvalued? And what should Japan be doing, if it’s not acting on its currency?

MS. ATKINSON: I’m not going to comment on the intervention. I think we don’t normally do that. As we have said on Japan, it’s important for the government to retain and remain in the position of encouraging economic growth. They have been clear on their monetary policy in that regard, and that’s where we think the focus should be. In the broader context of re-balancing, that is an important issue that will be taken up by the G-20, as to how the different pieces will fit together.

I have a question online about Pakistan. “Why is the IMF asking the government of Pakistan to raise the power tariff, when a third of Pakistan has been devastated by floods?”

And I’d just like to say, first of all, that of course the IMF—everybody—is extremely upset and feels for the people of Pakistan with these floods. We have moved—the IMF moved—quickly to provide emergency assistance under our Natural Disasters Assistance. And we’ve already disbursed $450 million through that assistance to help in the emergency.

Now, over the longer term, it’s important to note that the government is spending a lot of money on subsidizing power. I believe the figure is $2 billion a year. And much of that goes to people who are relatively well off. It’s an un-targeted subsidy to hold the prices down. It doesn’t particular help the needy and the poor—whilst at the same time, the constraints on prices are part of the problem that leads to pretty frequent power shortages and power outages. So it is important, as the government of Pakistan has said, to reform the power sector so that you have more reliable service, and also so that support is directed at the poor and the needy, and not in an un-targeted fashion, just through a general price—lower prices.

I have a different question online, asking “What are the main achievements that the IMF would like to see at the upcoming Annual Meetings?” Well, I think the most—there are a few really important issues that will be discussed. One, obviously, will be the state of the global economy, we will, of course, be putting out our new forecasts in the World Economic Outlook. But I imagine that governments around the world will want to talk about how to promote a recovery that is sustainable, that provides jobs for people. One of the characteristics of this recovery in the advanced countries which were hardest hit by the crisis has been continued high levels of unemployment, which I think is a very important issue.

The governments will want to talk about how the system should move forward—the new globalization. What will be the changes in the Fund’s mandate? And, as a result—you may remember the Istanbul Decisions from last year called for some shifts in governance, which are under heavy debate now and, you know, I’m sure will be a matter of discussion at the Annual Meetings—although the deadline for a quota shift is January 2011. We will also be discussing the Fund’s mandate in surveillance, if that is sufficiently broad and at the same time focused on the macro-prudential and financial issues that led to the crisis. And then the IMF’s lending facilities—as you know, we have recently adjusted those, further expanded those, to provide for more crisis prevention measures. So I think those are the main issues that will be discussed during the Annual Meetings.

QUESTION: I have a last question. So, can you clarify whether the IMF, the EU and Greece are talking to push back the date of loan—of Greece’s loan repayments?

MS. ATKINSON: The Greek program is proceeding as expected, and we had a mission—well, we had a main mission that reported that their program was on track—you know, the EU, the IMF and the European Central Bank in the summer There was an update mission to take a look at that, and to take a look at the 2011 budget last week, just an interim mission which confirmed that everything was on track. So we’re not—you know, I have nothing for you on changes to the IMF program.

We do expect that over the next 12 to 18 months—you know, Greece has been talking to its creditors recently. As is often the case, a senior person from the IMF accompanied them on those discussions, which I believe went well. And we expect that Greece may return to the markets, you know, in 12 to 18 months. But the program allows for them to stay out of the markets, as we had explained at the time.

Okay. So, may I apologize again—I have no more questions online—may I apologize again for the delay? And we won’t be having the regular, this regular briefing in two weeks’ time because we’ll have the Managing Director giving his press conference at that time. Thank you very much.


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