Transcript

Washington, D.C.
Thursday, November 1, 2012

MR. RICE: Hello, and good morning everyone. Welcome to this press briefing on behalf of the IMF. It's very good to see everyone in the room and colleagues online. It's especially good to see everyone emerged safely from the effects of Hurricane Sandy which took such a toll on lives and property for so many people on the Eastern Seaboard of the United States, and of course our sympathies are with those affected today.

I'm Gerry Rice, External Relations Department of the IMF, and as usual, this briefing will be embargoed until 10:30 a.m.

Allow me to make a few brief announcements and then to turn to your questions. Firstly, this coming weekend the Managing Director Christine Lagarde and the First Deputy Managing Director David Lipton will be in Mexico City for the G-20 meeting of finance ministers and central bank governors. That's November 4 and 5.

I can also tell you that the Managing Director will be visiting three countries in Southeast Asia later this month. Between November 14 and 20 she will be in Malaysia, the Philippines and Cambodia. In Phnom Penh she will attend the ASEAN Global Dialogue as well as the East Asia Summit.

David Lipton, First Deputy Managing Director, will be in London later this month, including at the London School of Economics, where he will be making a speech focused on transformation in the Middle East.

There are a couple of other things.

Next week the annual Jacques Polak Research Conference will take place. That's going to be November 8 and 9 here at the Fund. The theme of this year's conference is ‘Labor Markets through the Lens of the Great Recession’.

Finally, the Regional Economic Outlook for the Middle East, North Africa and Central Asia will be launched in Dubai on November 11. With that let me turn to your questions.

SPEAKER: Good morning, Gerry. What is going on with the negotiations with the Greek government, and when do you expect negotiations or the final agreement? In your opinion, why do we have so much delay especially after the prime minister announced that the talks are over?

MR. RICE: I'm sure you say the statement from the Euro Group yesterday and I'm sure everyone has seen that. We welcome that most policy issues between Greece and the European Commission, the European Central Bank and the IMF are being settled and staff level agreement on economic policies could come soon. Before the first review under the Expanded Fund Facility arrangement with Greece can be completed, understandings must also be reached between Greece and its creditors on financing terms consistent with debt sustainability. I think to answer your question there are if you will four big components that have been discussed, the fiscal reforms, the structural reforms where good progress appears to be made and still under discussion are the financing issues and financing consistent with debt sustainability which is the fourth issue.

SPEAKER: Can you explain to us more on the financing? You are looking for somebody to pay the gap? That's correct?

MR. RICE: I won't get into numbers since these things are being discussed, but again I think the important point that I was trying to make is that the financing for the program has to be consistent with debt sustainability.

MR. RICE: Good morning.

SPEAKER: Good morning. Thank you, Gerry. What messages are Managing Director Lagarde and the First Deputy Managing Director Lipton going to deliver to finance ministers and governors in Mexico? Secondly, is there anything new to brief us on the loan discussions with Egypt? Thank you.

MR. RICE: On the G-20, I think the message will be to a reiteration in many ways of the main message of the Tokyo Annual Meetings held just a few weeks ago, which is concern with where we stand on the global economy and crisis, the uncertainty that continues to weigh on growth and the need for policy action on a number of fronts, and these were spelled out as I'm sure you know in Tokyo.

In terms of further discussions this weekend looking at the agenda, again there is going to be further discussion of the global outlook and the global economy and where we stand. There will be discussions of financial regulation which is an important topic. And the Global Financial Safety Net where as you know further progress was made in Tokyo on a number of fronts including further strengthening of IMF firepower, so those discussions will continue. And I think further follow-up on some of the major issues discussed in Tokyo relating to the strengthening of IMF surveillance, the integrated surveillance decision, the external sector report and the global policy agenda that was discussed in Tokyo with the IMFC, which is the governing body of the IMF, and I think the issues that are embodied there will be emerging again in the discussions this weekend.

On Egypt, the IMF technical team started this week negotiations with the Egyptian authorities in Cairo over their economic reform program. Since that mission is in the field, as usual, Danny, I won't have a great deal of detail in terms of the talks. What I can say is that the Fund stands ready to support Egypt and looks forward to working closely with the authorities on a program that addresses the country's economic challenges in a way that protects the vulnerable sectors of society.

SPEAKER: You mentioned in the first part of the question also the IMF director mentioned further strengthening of IMF firepower. Would you elaborate a little bit on that?

MR. RICE: These were developments in Tokyo, Danny, where there were a few further pledges to the IMF firepower taking it from $456 billion to $461 billion. Furthermore, there were a large number of actual bilateral agreements signed in Tokyo and there was as whole press release and communication around this in Tokyo so you can find that on the record. Separate from that additional firepower there was also further agreement in Tokyo at the other end of the spectrum if you like because there was agreement among the membership on a strengthening of the Poverty Reduction and Growth Trust which would put IMF financing for the low-income countries on a sustainable footing. There was really a package of support around strengthening of IF resources that I believe will be followed-up on in Mexico City. Good morning.

SPEAKER: Good morning. There has been reluctance by Spain to support a E.U. bailout which would trigger the OMT and also from Italy. Is that reasonable and appropriate or there concern by the IMF that Spain is not taking advantage of the bailout and the OMT?

MR. RICE: As we said before here in the decision as to whether Spain would request further assistance is really one for the Spanish government to decide on. You may have seen in recent days that the IMF completed the first monitoring mission of the banking sector and we had a communication on that, I think it was last Friday a statement was issued, with the main finding that important progress has been made in reforming the financial sector in Spain and that it's important to maintain that momentum in the challenging period ahead. We have also said here before more broadly on the reforms that Spain is undertaking that we support those reforms, we think that they are headed in the right direction and key now is implementation.

SPEAKER: To follow-up on those two, since you're commenting on Spanish reforms, there is growing popularity in Italian political circles against some of the austerity measures proposed by the Italian government. Do you think that's appropriate or would you say that those austerity measures are also necessary?

MR. RICE: Again -- the measures announced and being undertaken by the Italian government are headed in the right direction with the objectives of overcoming the current difficulties, restoring growth, bringing back employment and the key is implementation which is underway.

SPEAKER: If I may, the IMF's role in Europe in particular with any sort of OMT new bailout -- has that been resolved whether the IMF will participate in any financing or does it require specifically a request before the IMF can determine exactly what role it will play?

MR. RICE: As you probably know, before we would become involved in any country, there needs to be a request, so that's a sine qua non. What we've also said specifically on the OMT and broader support is that the IMF stands ready to support within our frameworks and again contingent on country requests, I think the modalities and the process of doing that would be something to be worked out at the appropriate moment. Good morning.

SPEAKER: If Greece is given two more years to meet its fiscal targets, would the IMF stand ready to increase its financial support, or to lower, for instance, interest rates on the loans made to Greece?

MR. RICE: We have said before that we think there's a good case for extending the period of time for Greece to reach its fiscal targets as you say. In terms of the financing, I want to repeat that it's very important that the financing would be consistent with the debt sustainability and that the IMF is precluded by its mandate from reducing the interest rates on our loan.

SPEAKER: [inaudible]

MR. RICE: Yes, that's something that the IMF does not in the context of its programs, so we would not be reducing the interest rate. Just to step back, what we have in Greece is am Extended Fund Facility which is already at an extremely low interest rate and it's at the lowest that the IMF at the moment is capable of giving and that's what's in place.

SPEAKER: [inaudible]

MR. RICE: What I'm saying is that the financing and the debt issues are under discussion. I think that's what I had said earlier, so I wouldn't want to get into the details of who exactly is going to do what, but it's key that the financing again be consistent with the debt sustainability.

SPEAKER: There is an internal debate in Greece regarding the so-called Lagarde List. It's a list that the then French finance minister had given to her Greek colleague or counterpart with names of Greeks with accounts at HSBC in Switzerland. I'm sure that you've followed the story and it has to do with the M.D. in a way. How do you assess what's happening and are you comfortable that the Greek authorities will go to the bottom of this issue? Because it touches on something you have repeatedly noted which is dealing with tax evasion.

MR. RICE: I think that's the central issue, separate from the issue of the list. You're right that the IMF has said now consistently for several years that as the Greek people make these tremendous efforts to get the country back on track, it's very important that the adjustment be shared in a way that is fair and equitable to the Greek people and an important component of that is that the tax burden be carried in an equitable way, particularly that the better off, the well off, in Greek society pay their fair share.

SPEAKER: [inaudible]

MR. RICE: On the list, I don't have a great deal for you. As you said, this refers to a period before the Managing Director was in office here at the IMF so I would refer you to the French finance ministry for further details.

SPEAKER: To follow-up on this, can you tell us maybe how Madam Lagarde feels that since she gave the list to the Greek government -- lost the list. How she is feeling?

MR. RICE: Again, I don't have that much for you beyond what I said. The issue of fair burden sharing on tax issues is the overarching one here.

I'm going to go online for just a second. There is a question about, "Do you see a chance for reaching an agreement with Hungary by the end of this year? Do you have a date for the resumption of the talks?"

I can say directly that I do not have a date for the resumption of the mission to Hungary. There is no mission currently planned. I think I can also say that meaningful progress on program negotiations would require a clear indication from the authorities that they see the IMF and the E.C. as valuable partners in designing a reform and adjustment process and a clear commitment from them to policies that ensure balanced fiscal adjustment and promote growth. The general direction of these policies was summarized in our last press release in July from the IMF and the commission. Is this on Hungary?

SPEAKER: Yes, actually it is.

MR. RICE: Go ahead.

SPEAKER: Why is that necessary that the E.C. be involved particularly when much of the E.C.'s complaints which are separate from -- IMF economic complaints are political complaints and the IMF is supposed to be apolitical?

MR. RICE: We've been as we are in a number of countries, working jointly with the E.U. in Hungary. In fact, it was a joint E.U.-IMF mission in July, the note to which I referred. I think it's important that we move forward in a way that strengthens that partnership. Of course as in all of these countries, the IMF also has its own independent analysis and advice and we apply that as appropriate also.

SPEAKER: I wanted to follow-up on the report from the -- in Greece. I think yesterday the Euro Group said that's supposed to be coming November 12 or 13. I was wondering if you could confirm that and also perhaps what's been holding that up. Then also a quick question on Ukraine.

MR. RICE: I'll come back to you on Ukraine. On the Troika report and when that will be published, I think as most people here know, the process is that the IMF staff completes its report and we submit that to our Executive Board. Once there is a staff level agreement on the review and on the financing package consistent with the debt sustainability as I've just said, that's the process that's underway. I don't have a timeline on that for you today. Why is it taking so long? Obviously we like many others would hope that this can be done as quickly and as expeditiously as possible, but these are very complicated, difficult issues and we're reading about them every day. You had another question?

SPEAKER: On Ukraine, there is a mission visiting now. I was wondering if you could comment at bit about the progress of that. Also the government has said that may be able to come to an agreement without having to change their energy subsidies, if you could elaborate whether that's possible.

MR. RICE: What I can tell you is that the authorities have expressed interest in resuming a program relationship with the Fund, but the specific modality and conditions of that have not been discussed yet. Obviously, Ukraine has just had the election, so we look forward to engaging with the new government.

SPEAKER: Regarding Greece, a few questions. What -- the MD and the Euro Group call yesterday about Greece? And is she going to attend the Euro Group, which is said by Jean Claude -- to be decisive on Greece? Second, regarding the debt sustainability, does the IMF recommend any particular way to reduce debt? I'm thinking particularly of the bond buy-back that is now being suggested by the Germans and the ECB? Then a completely different question if you can remember it. In Mexico the incoming government has expressed interest in renewing its FCL and I wanted to know the IMF's opinion on this.

MR. RICE: Let's see if I can get through that. On the call, yes, Madam Lagarde was on the call. On the debt reduction issue generally, our view is that there are many options to help reduce Greece's debt burden and they should be considered. You asked about buy-backs. They could be useful if they were implemented in such a way to deliver a meaningful reduction, and I think that's the important point, again, to make sure that this is a meaningful reduction. I think it's critical for the program's credibility that Greece's debt burden be sustainable, so that that's really the key in looking at the different options. Did you have one more on Greece?

SPEAKER: The Euro Group –

MR. RICE: I would anticipate -- Madam Lagarde has traditionally participated in those meetings and I would expect that she would participate in that one, yes. You had a question on Mexico. Did I cover Greece? You had a question on Mexico, on the FCL. Right?

SPEAKER: To renew it and if the IMF is open to it.

MR. RICE: What I can tell you there is we've seen, we've taken note of the recent statements by Mexican officials regarding the renewal of the FCL as you said. At this stage I wouldn't say more other than to note that this would be an issue that the IMF's board would consider in due course should the formal request be made.

SPEAKER: Gerry, I have a question on Cyprus -- a big issue. What is the case with Cyprus? Is the IMF in negotiations with the government of Cyprus? Because -- the finance minister of Germany and I quote, he said that he did not expect concrete negotiations between Cyprus's international lenders to stop before 2015. We don't understand what is going on. I believe that you are in negotiations with Cyprus. Correct?

MR. RICE: We had a mission to Cyprus earlier this year, Michael, as I'm sure you know. What I can say is that the IMF and the European Commission have received counterproposals from the authorities on a number of policy issues. We have been analyzing and discussion them with the Cypriot authorities and with our European partners. Based on this assessment and dialogue we expect a follow-up mission to Cyprus soon, but dates have not yet been set.

SPEAKER: I want to ask another thing if it is possible. I promise it's the last one.

MR. RICE: The last one.

SPEAKER: Gerry, Mr. Kouvelis as I'm sure you know is the leader of one of the parties that is supporting the government of Mr. Samaras, said that he cannot support the measures especially on the labor reforms and that because of that many people in Greece are afraid that the government is going to collapse. The question is why the IMF insists on the labor reforms.

MR. RICE: What I would say is, stepping back again, Michael, what we've been engaged in alongside the EC, ECB and of course working with the Greek government is to get the program back to on track with the objectives of restoring growth and with the objectives of increasing employment as fast as possible. The package of measures including labor market reforms are part of that. These are not something imposed by the IMF in a unilateral way. They are part of the discussions both with our partners and with the Greek government. Then I think on your point about the internal political support for those measures, I really think that's a matter for the Greek government to pursue.

Let me just say, not to neglect, that there is a question online about Portugal. "Will new adjustment be necessary? What kind?"

What I would say on Portugal is that we completed the fifth review last week. We had an extensive media interaction including with Abebe Selassie, who is our mission chief for Portugal, and there is a press release, conference call transcript, and I think the answers to these questions are there and I'll probably leave it there today. Again thank you for coming. Good to see you all. Glad everyone emerged from the hurricane. See you soon.