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

December 1, 2011

Washington, DC
Thursday, December 1, 2011
Webcast of the press conference Webcast

MR. RICE: Good morning, everyone. I'm Gerry Rice of the External Relations Department at the IMF, and welcome to this regular briefing. This is on the record and embargoed until 10:30 a.m. Washington time.

Let me take a minute to update you on some upcoming events and management travel. As you probably know, the Managing Director of the IMF Christine Lagarde is currently visiting several countries in Latin America. Earlier this week she was in Peru and Mexico. Today she is in Brazil, and in fact, from a few hours from now she will be doing a press conference with Minister Mantega in Brazil and I believe that can be found on a live webcast. Let me also mention that for the Managing Director on Tuesday of next week, that's December 6 at 12:30, she will give a speech on the Middle East at the Wilson Center here in Washington, as part of a conference on Development and Governance in the Arab World.

Turning to Mr. Lipton, the First Deputy Managing Director, he will deliver some remarks tomorrow, Friday, December 2, at a trade workshop organized by the IMF, the WTO and the World Bank which will be held across the street at the bank, at around 6:00 p.m. Deputy Managing Director Zhu Min will be participating in the Fourth International Tax Dialogue Conference in New Delhi on December 7 to 8. He will then visit Shanghai to deliver the keynote address for the High-Level Regional Symposium on Monitoring and Managing Financial Stability, Lessons from and for the FSAP, and that will be on December 9 and 10.

Finally, we have a new issue of "Finance and Development" focused on Africa and that will be available online this afternoon. With that, let me turn to your questions.

QUESTIONER: Any idea today when the Board is going to meet for the sixth tranche to Greece? And if you can tell us if the staff has already given their report to the Board.

MR. RICE: What I can tell you is that indeed the IMF Board will meet to consider the fifth review on Monday, December 5. That's this coming Monday, so I can confirm that.

QUESTIONER: [inaudible]

MR. RICE: When the Board considers the review, it has to have the report from the staff.

QUESTIONER: [inaudible]

MR. RICE: That's going to be discussed on Monday and then as is the norm, it will be published in due course.

QUESTIONER: Is the IMF in consultation with Italy on the financing program?

MR. RICE: As we have reiterated in the last couple of days, there are no discussions with the Italian authorities on any form of IMF financing, so I can tell you that.

QUESTIONER: I understand that there are no discussions at the moment with the Italian authorities -- are you planning in any way any form of support for Italy or are you discussing any kind of approach? Are you analyzing the situation? This is my first question. My second is at the last press conference we were told there will be an IMF surveillance mission in Italy by the end of November. Here we are on December 1, what can you tell us on that?

MR. RICE: Thank you very much. Again, no discussions on any form of IMF financing. As Prime Minister Monti mentioned the other day, he and the Director of our European Department Reza Moghadam met in the margins of the Ecofin meeting in Brussels which took place the other day and they began discussing the modalities of the monitoring by the IMF that had been requested by the Italian authorities in Cannes you may recall. Mr. Monti said that there are important deadlines coming up for Italy and that they would need to be taken into account in the planning of the mission so that I don't have a date for you on the timing of the mission. What I can tell you is that this will be part of our enhanced surveillance and monitoring work which is intended of course to support the major efforts being undertaken by the new Italian government.

QUESTIONER: So we can assume you said that in this meeting at the margin of the ECOFIN they start discussing when Italy would be ready to receive the inspectors and so you are waiting to agree with the Italian authorities for when to go? Correct?

MR. RICE: Yes. I think I said that the Prime Minister indicated there are some important deadlines coming up. I think he indicated he is taking the proposals to the cabinet for example on Monday and we want to take these things into consideration in planning the timing of the mission. I can also tell you we expect this to be structured along the lines of our regular surveillance Article IV missions. A team will meet with the relevant officials to assess Italy's economy and the Italian government's objectives. I don't really have much more detail beyond that at this point, but I think that helps to respond to what you were asking.

QUESTIONER: You were talking about the modalities of the Italian monitoring. What are those modalities? What exactly does the Fund set up? Clearly Mr. Monti is going to be outlining what his ideas are, but what are those modalities that the Fund would be looking at? We want more details. Number two, you talk about no discussions on IMF financing. Are you talking about no formal discussions on IMF financing? Is it possible that the Fund could have raised these discussions informally with the government?

MR. RICE: No discussion, emphatically, with the Italian authorities on any form of IMF financing, just to be clear on that. On the process, as I said, I don't really have much more on the modalities beyond what I said. Part of our regular surveillance and Article IV, you're familiar with that. Mission frequency is likely to be quarterly. I don't have a date yet for you given that the Prime Minister has mentioned these important deadlines in terms of laying out the new proposals. That's about as much as I have.

QUESTIONER: There have been reports that people in Europe are considering the ECB to lend money to the IMF to boost its lendable resources, but some people within the E.U. think it's not feasible, it's not legal because the ECB is not the central bank of any member country of the IMF, and some people within Europe think that in the contrary it's totally feasible. What's the position of the IMF on this legal aspect?

MR. RICE: What I can tell you is that legally central banks including the ECB can lend to the Fund. What I'd also like to say is that there are no discussions on that specific issue going on.

QUESTIONER: We have the Euro finance ministers yesterday saying that they want more resources for the IMF. First of all, do you have an understanding of what they mean by a greater role for the IMF? Secondly, is there any timing to increase your resources? Are we looking at the G-20 meeting of finance ministers in February?

MR. RICE: I think I'd probably like to step back on that one a bit and say that as you recall in Cannes a short time ago, the G-20 leaders committed to ensuring that the Fund would have adequate resources to assist its members and a number of countries have expressed the willingness to help boost the Fund's resources. And coming to your question in this regard, I think we welcome the most recent expression of support from Euro Group ministers.

In terms of the IMF's role, as you know, the IMF has been playing a very active role in Europe. We're involved in several countries in terms of programs. We've been very much involved in most of the major meetings taken place. The Managing Director herself personally has been directly involved and very active. Beyond that, I don't have dates or deadlines for you in terms of Fund resources though I think we would all expect that this is something that will be on the G-20 agenda in the upcoming meetings of the G-20.

QUESTIONER: What are the expectations of the Fund for the December 9 E.U. Summit? There has been a comprehensive solution that has been asked for by the Fund for years. Could you tell us what your advice would be to the E.U. leaders?

MR. RICE: I think it's interesting that you used the word "comprehensive" because I think when the Managing Director spoke in her press conference the other day, she said the same thing, that as we've said for some time, resolving this crisis will require a cohesive, comprehensive effort in addition to a large and effective firewall. We're going to need efforts at the national level in terms of policy adjustment and policies to support growth and employment, and at the regional level, to make further progress on fiscal and financial integration in the Euro Area overall. So I think that these are all items that I would expect would be discussed on December 9.

QUESTIONER: -- in the past you had accused the Greek government regarding the exact implementation of the program. Today are you satisfied so far by the reactions of the new government to implement the program? Do you see any differences compared to the previous government in the way they operate about the program?

MR. RICE: As I mentioned earlier, our Board will be considering the fifth review on Monday and our assessment then will be published in due course and I think it will be apparent where we stand when that report is issued. I think in terms of our views, they are well known because the program documents have been published in the past. We are placing along with the government of Greece great emphasis on competitiveness and growth and the measures that can get us there. There is a deep, ambitious structural reform agenda, reform of the labor markets, product and service markets, so I think all of these items remain on the program agenda for Greece. I believe there is support there from the Greek government and certainly the IMF is looking to support these efforts too.

QUESTIONER: I have a follow-up on Greece. When do discussions on a follow-up program begin? Number two, I wanted to find out about Hungary and when is a team going to Hungary and exactly what has the government asked -- negotiation on a program? But are there any details on size and how quickly this is going to continue?

MR. RICE: On Greece as I mentioned, we're focused at present on completing this review and I mentioned what's happening on Monday. If afterwards there is a request for a new program, that will be evaluated in due course by Fund management and the Executive Board.

On Hungary, your other question, as you've mentioned, the authorities have indicated that they have asked for financial assistance from the Fund. A similar request was sent to the E.C. The authorities have indicated that they intend to treat any possible financial assistance from the Fund or from the E.C. as precautionary. We have a number of instruments that might be able to serve that need, but the precise modalities again for financial aid to Hungary have not yet been finalized.

QUESTIONER: The Hungarian government said the talks would start in January. You don't have any confirmation?

MR. RICE: I don't have a date yet for you, but we'll come back to you on that as soon as we do.

QUESTIONER: May I have a follow-up? Does the Fund have comment on central bank actions yesterday, please, and whether they think that that is going to have any impact? Also do you have a general assessment of how the global economy is doing considering that action was taken because of a very serious credit squeeze in the market?

MR. RICE: In fact, the Managing Director I think commented yesterday to the effect that the coordinated action by the six major central banks will help to ensure that banks have access to needed foreign currency liquidity in support of financial stability and the functioning of markets, and I believe the M.D. welcomed the action in that context. They come at a time of significant stress in U.S. dollar funding markets in Europe and elsewhere, and they have eased the terms on which U.S. dollars are provided to the market, and they extend those facilities to other major currencies. I think as all can see, today market participants have largely welcomed that action and there seem to have been improvements in the availability of dollar liquidity in offshore markets. Your second question was –

QUESTIONER: The overall situation considering what's going on in the global economy as far as the fact that the banks had to take that step. Then just to follow-up on that one, have there been any requests for the Fund's own short-term liquidity program; not a program really, just a credit line?

MR. RICE: No requests that I'm aware of as yet on that last question. On the outlook as we've said in our last WEO, the global recovery remains unbalanced and bumpy, and since that WEO there has been more of a slowdown in economic activity especially as we all know in Europe. The turmoil in the financial market is also contributing to further uncertainty about the economic forecast. We will have our forthcoming WEO updates toward the end of January next year probably and we will likely be revising downward the forecast to reflect these developments.

QUESTIONER: A global forecast or individual forecasts?

MR. RICE: I'm not going to get into that. Just we're going to be revising the forecast of these developments.

QUESTIONER: Today there was another massive strike in Greece. The majority of public opinion is concerned that the program has failed. The IMF and the Troika generally insist that there is a lack of implementation, the unions and opposition parties insist that the recipe is wrong. In other words, they don't see light at the end of the tunnel because the IMF's program doesn't promote the development in growth. I would like your comment.

MR. RICE: I think as I've said before here, we understand that this is a very difficult time for the Greek people. In this regard we've stressed from the very beginning the importance of the issue of fairness and that the reforms be carried out in a way that are seen to be socially just, and in particular protecting the most vulnerable groups. It's essential to distribute the burden of adjustment evenly including on high-income earners with a fairer tax system and things that we have said before. We are going to be reviewing the program again. Our Board will meet on Monday and the program objectives remain. I think we're on the same page, growth, employment and putting Greece back on a sustainable path.

QUESTIONER: I have a question on the U.S. How does the Fund the fiscal outlook after the failure of the joint committee to find measures to reduce the deficit?

MR. RICE: On the U.S., I think we were disappointed by the failure of the Joint Select Committee to reach an agreement in view of the pressing need for the U.S. to address its long-term budget problems. Although the automatic cuts should deliver fiscal savings start in 2013, further savings will be needed over the next decade and consolidation should include both entitlement reform and higher revenues. That said, it's also important we believe to extend some supportive fiscal measures such as unemployment insurance and payroll tax relief into next year since activity remains weak and risks loom.

QUESTIONER: I wonder if you can outline to us how this issue of resources is going to be resolved. Does the Managing Director after discussions in Brazil come back and make a formal proposal on the funding needs? Clearly, if you look at what's going in the economy the membership and the G-20 have agreed that there needs to be more resources, but how does that exactly work out?

MR. RICE: What I would say is again refer back to Cannes and what the G-20 said, that they will ensure first and foremost that the Fund has the resources it needs to support the membership. Again, we've seen over the past several weeks expressions of support of the membership for that. While the Fund's current lending capacity remains substantial, recent market developments suggest that the downside risks for the global economy as I mentioned are increasing and of course we continue to monitor these developments closely. I wouldn't want to get into specifics at this point, but we're confident that member countries will provide the Fund with additional resources if and when this is needed.

I understand we have some questions online to let me go to those. There is one question on the Dominical Republic and let me see what we have on that. The question is, what have talks with the authorities from the Dominican Republic focused on this week? Are they really making important advances with the standby arrangement? Will the review be completed this year or extended a few more months?

What I can tell you is that a delegation from the Dominican Republic headed by Minister of Finance Toribio and the Governor of the Central Bank Valdez visited the Fund's headquarters yesterday. The delegation met with senior staff of the Western Hemisphere Department of the Fund including Alejandro Santos the Mission Chief for the Dominican Republic. The purpose of the meeting was to continue discussions on policy issues related to the program. The authorities provided staff with useful information that staff is in the process of analyzing. The dates for a future mission are still to be determined.

I also have another question on Greece, asking, given the delays on the release of the sixth tranche, when will the mission for the sixth review go to Athens? Will it be before the end of the year or maybe in January after an agreement on PSI?

What I can say in response to that is that there is a mission to schedule Athens December 12 to 16 and it will hold preliminary discussions on policies needed to help make progress toward Greece's overall economic objectives. And as I had mentioned earlier, the review is going to the Board on Monday next.

QUESTIONER: What is the IMF's participation in the discussions between the Greek authorities and the banks on the Greek PSI, your involvement in this?

QUESTIONER: As you know, and I think we've discussed before, these discussions are principally between Greece represented by its advisers and the creditors to Greece, and these discussions are ongoing. The parameters for the process were established at the October 26 summit, namely, the need to reduce debt to GDP to 120 percent by 2020 with a maximum of 30 billion euro available to facilitate full participation. So the main discussions are between Greece and its creditors and the Fund obviously is a very interested observer in that process.

QUESTIONER: Talking about the European Financial Stability Fund, is there any discussion of the IMF participating in some way with the European Financial Stability Fund? I understand the IMF lends directly to member states, but in this exceptional situation are you considering this possibility?

MR. RICE: Again I don't want to get into hypotheticals and possibilities of how the Fund might be involved with the EFSF. We have said for quite some time that the firewall to contain the crisis needs to be large and effective, and on the EFSF we welcome the decisions announced by the Euro Group just the other day which build on plans announced on October 26.

QUESTIONER: To follow-up on the question of the joint efforts by six central banks yesterday, do you think it's enough -- the new liquidity will be enough to solve the structural problems in some advanced economies? As some economist said, the key problem is not liquidity but confidence in new growth. Secondly, on the U.S. economy in particular, do you think worries over a double-dip recession of the U.S. economy are over and we might see a bright picture in the U.S. next year?

MR. RICE: As I said, we welcomed the coordinated measures taken yesterday as a positive step. As I also said, we think what is required is really a cohesive and comprehensive approach so that we look forward to further steps being taken at both the national and the international level in the coming days. On the U.S., our forecast is not for a double-dip recession.

I do have one question on Argentina, were IMF officials contacted recently by the Argentine authorities and for what purpose?

There I can say, yes, we have been contacted in relation to the investigation into private inflation statistics firms, and what I can say is that the IMF has been asked to provide information and we have responded with a press line which was issued yesterday and let me repeat it here, "The IMF is not subject to judicial requests from member countries as a result of its immunities which are required by all IMF members as part of their obligations under the Fund's Articles of Agreement."

I'm going to wrap it up here I think unless there is a burning question. Let me thank you all very much for being here today and we'll see you in a couple weeks' time. Again there will be another IMF press conference probably later this afternoon with the Managing Director. Thanks, everyone.



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