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

December 12, 2013

Washington, D.C.
Thursday, December 12, 2013
Webcast of the press briefing Webcast

MR. RICE: Good morning, everyone and welcome to this briefing on behalf of the International Monetary Fund. I’m Gerry Rice, the Director for Communications at the Fund. As usual our briefing this morning will be embargoed until 10:30 a.m., that’s Washington time. Also, this will be our last press briefing before the end of the year and we’ll be in touch with the schedule for the new year very soon.

As usual, let me make a few points about upcoming events, management travel here at the Fund, and then I’ll come to questions in the room and take some questions form our colleagues online as well.

Let me begin with our Managing Director, Christine Lagarde, and give you a little bit of advance information that she will be traveling to Africa in January for meetings with authorities, private sector, and civil society, and we will have the details of that trip very soon and be in touch with you on the specifics. But that’s Africa at the beginning of the year.

At the moment our First Deputy Managing Director, David Lipton, is taking part in the G20 Sherpas meeting in Sydney, Australia, which concludes tomorrow. Mr. Lipton will also take part in the G20 Finance and Central Bank Deputies Meeting in Canberra, and that’s on Sunday and Monday, December 15 and 16.

Let me also mention that our Deputy Managing Director, Minouche Shafik will be speaking at a conference on the Nordic Baltic banking and financial sector in a conference in Tallinn, Estonia that will be tomorrow. It’s a high level conference organized by Estonia and Sweden’s central banks together with the IMF. Ms. Shafik will speak on the opportunities and challenges posed by the different and changing regulatory frameworks as related to the emergence of a banking union. That will be live webcast on so you can catch it there.

Finally, later today – later this morning actually – we will publish the IMF’s biannual work program as we always do, which summarizes the priorities for the IMF in the months ahead. Just on the backdrop, the program was considered by our executive board on November 25 and it builds on the IMFC communique of October 2013 and the Global Policy Agenda. Both of those documents were provided to you at the time. So the IMF work program for the next six months and an accompanying press release is available to you now, under embargo actually, for release at 10:30, so at the end of this briefing.

QUESTIONER: Thank you, Gerry, for all your help in past years. I want to ask, do you have comments on the recent budget view announced by the U.S. Congressional budget negotiators. Secondly, next week the Federal Reserve will have its final policy meeting for this year. With this budget deal and the recent upbeat economic data in the U.S. do you think the U.S. economy is strong enough to withstand a (inaudible) red taping right now. Thank you.

MR. RICE: Thank you. On the budget agreement we welcome the agreement reached by the budget conference committee; an encouraging sign of renewed bipartisanship. If approved by congress it will eliminate the possibility of another standoff for two years and provide partial relief from the sequester. It’s also important, of course, as the IMF has said consistently to address other important fiscal issues including entitlement and tax reforms as well as the need to raise the debt limit in durable fashion. And again, we’ve been fairly consistent on that, on the need to address the medium term issues.

You asked about the strength of the U.S. economy. Overall, recent data releases have been mixed but on balance are consistent with a pickup in growth in 2014. The November employment report surprised on the upside, the same as the October report, underscoring continued improvements in the labor market. Payrolls improved more than expected and the unemployment rate fell to 7 percent, as you probably know. Similarly, the second estimate of GDP growth in the 3rd quarter came in higher than anticipated at an annualized rate of 3.6 percent. So again, signs of a pickup in growth in 2014.

On your third question on monetary policy, we believe the accommodative monetary stance by the Federal Reserve over the past few years has provided very important support and remains appropriate. Looking forward, the pace and composition of asset purchases will need to be gradually adjusted to reflect revolving economic conditions and effective communication of the exit strategy will be important to reduce the risk of excessive market volatility. So that remains our position on the tapering that you asked about.

QUESTIONER: Good Morning, how are you? Because we are puzzled, to tell you the truth, can you tell us, what is the status of the negotiations in Greece with Troika. What are the obstacles? And also if you can predict that of this ordeal, thank you.

MR. RICE: Okay, on the status of the discussions and the missions, just to remind staff teams of the European Commission, ECB, and the IMF, return to Athens this week to continue discussions with the authorities on the policies that could serve as a basis for the completion of the fifth review of the program. This would be followed by a full negotiating team to return to Athens in January, and we issued a statement in this regard recently. I hope that was clear. The IMF team is expected to remain in Athens for about a week.

Now regarding the issues being discussed, which you also asked about: Of course as is usually the case within the mission in the field; on the ground, it would not be appropriate to go into the detail while the mission is taking place.

Let me however, direct you to an interview by the mission chief, Paul Thompson, with a Greek newspaper, published very recently, around November 24th. And the reason I point you to that is, it gave a good overview I think, of the main issues that are outstanding, that need to be resolved in the course of this review. Did you have another question?

QUESTIONER: I asked if you can predict when the negotiations are going to finish.

MR RICE: Beyond what I said about that, the team is in discussions now in the field with the full negotiating team, to return in January, and I wouldn’t want to of course preempt those discussions now. So let me leave it there. There was a couple of questions here. Good morning

QUESTIONER: Good morning. So I have a question about Ukraine. You must know the situation on the ground, you know that Ukraine Kiev hasn’t signed an association agreement with European and people on the street - against entering the customs union with Russia and Kazakhstan, and Belarus. So now the question is IMF were to reconsider its loan for Kiev Ukraine and under which conditions do you see any room for more flexibility here from your side. And have you recently been contacted by Ukrainian authorities on this issue, thank you.

MR RICE: You may have seen the recent statement from the managing director, Christine Lagarde, and just want to quote what she said, “We want to help Ukraine if Ukraine needs us, if Ukraine wants to help its economy going in the right direction.” She said that just a day or so ago. Where we stand, there have been no discussions between the IMF and the Ukrainian authorities in the last two weeks.

Again as I said, we stand ready to continue the discussions on these matters and to support economic reforms in Ukraine. In terms of the reforms and the agenda, I think we’ve made this clear in a number of statements. The recent concluding statement on the article four, there was also an interview, an article by our resident representative recently in the Ukrainian press.

But just to remind, the reform agenda includes increased exchange rate flexibility combined with policies to strengthen the financial sector, fiscal consolidation to bring expenditure to sustainable levels and reduce financing gaps. Gradual but meaningful and broad-based increases in domestic energy tariffs in conjunction with scaled up social assistance for some forty percent of households in need. And finally, comprehensive structural reforms to improve the business climate, and to support growth. It may be helpful if I also tell you that our executive board will be discussing the Ukrainian article 4, and that’s scheduled for December the 16th. So that’s Monday. Let me emphasize again, that’s the discussion of the Article 4.

QUESTIONER: (Inaudible)

MR. RICE: Well, you know, the Article 4 as you probably know, is a comprehensive document, so there will be broad discussions. The focus of the board’s discussion on Monday is the Article 4.

QUESTIONER: I wanted to ask you, how does the IMF review recent developments in Romania regarding the (inaudible) the contract has with the IMF, and when would an IMF mission go to Romania to speak with Romanian authorities?

MR. RICE: Thank you. Just maybe stepping back, during the recent mission, the IMF staff team agreed, subject of course as always to the discussion and approval of our executive board, they came to an agreement with the Romanian authorities on the policies needed to conclude the first review and the Romanians stand by the arrangement with the fund, including policies on the fiscal deficit. Now, we’re aware of President Traian Basescu’s disagreement with the government over the specific measures to be used to reach this fiscal target. We are monitoring those developments closely of course, and awaiting a decision by the authorities on whether they would wish to modify the policies needed to secured the agreed deficit target, again before the policy package would then be submitted to our executive board for approval.

We trust that the authorities remain committed to fully implement the key elements of the agreements so that the first review of the SBA can be completed. I do not have a time for you on the return of the mission.

QUESTIONER: Are you expecting first for Romania to have budget for 2014, and then the mission would come to Romania, or —

MR. RICE: I wouldn’t want to get into the specific sequencing details, and would like to leave it where I described it to you.

QUESTIONER: Good morning. I just wanted to follow up on Ukraine, if I may. As you know, European Union is very anxious to have Ukraine involved in the trade agreements, and there’s some stories that say that they’re talking to IMF and World Bank, and others to see how they can help Ukraine. So I was wondering if you see any scope for IMF support for Ukraine that wouldn’t involve a formal program. But any other things you could provide, like technical assistance. Things like that. Thank you.

MR. RICE: I wouldn’t want to speculate on specifics. But to repeat what Christine Legarde said the other day and what I’ve just said this morning, that we stand ready to continue discussions with the authorities on these issues and support economic reforms in Ukraine. You know as always, the IMF’s decisions are based on our independent analysis and assessment so there is no direct connection between discussions on a potential new IMF program.

And Ukraine’s talks with the EU are with other bilateral talks that the Ukraine government may be having. We’ve been I believe, consistent in our diagnosis and advise on the measures needed to correct the long standing imbalances, and to address the major vulnerabilities in the Ukrainian economy. I think I described those to our colleague and the authorities ownership of those policy measures of course remains very critical.

QUESTIONER: Just to quickly clarify, the authorities haven’t proposed any other programs to you? I mean I know it’s always a negotiation, but they haven’t kind of asked for anything outside of their long standing request to have a new program?

MR. RICE: What I can tell you is there have been no discussions the last two weeks.

Can I take one online so our friends don’t feel completely neglected and then I will make sure that everyone gets a chance to ask. But there’s a question from Jeremy Torschen, our friend with AFP. And Jeremy is asking, “Do you think that the Volcker rule is the appropriate tool to prevent US banks from engaging in excessive risk taking. And just for the record, Jeremy’s got a question on Ukraine, but I think we have touched on that, so I’ll focus on his Volcker Rule question.

The IMF welcomes the finalization of the Volcker Rule, which aims to reduce systemic risk in the banking system in the United States. The final rule is designed to achieve a balance between market activities that prove to be very risky, and those that are crucial to financial market soundness, hedging and market making for example. A lot of course hinges upon the implementation of the rule. Supervisors will need to make significant efforts, both to ensure that implementation retains the spirit of the rule and the impact of the rule minimizes negative effects on market liquidity in the United States and globally.

Thank you for your patience. Let me turn to colleagues in the room

QUESTIONER: Mrs. Lagarde acknowledged once again, two days ago that there were mistakes in the first program regarding Greece. But she also admitted something else, that the people in Greece find it really hard to pay their own debts. What is your comment?

MR. RICE: Thank you for your patience. Let me turn to colleagues in the room. Eleni, good morning.

QUESTIONER: Thank you. Ms. Lagarde acknowledged once again two days ago that there were mistakes in the first program regarding Greece, but she also admitted something else: that the people in Greece find it really hard to pay their own debts. What is your comment?

MR. RICE: Well, you know, in a way this is an old story that we’ve discussed many times here in this briefing room. So, you know, as we’ve said repeatedly reasonable macroeconomic assumptions were made at the onset of the first Greek program, so going back in history to May 2010. And these assumptions were rapidly updated as events unfolded.

The current program, so the new program different from the first program, has already been changed in response to various developments, indeed, at the urging of the IMF. And the program now incorporates a lower amount of total fiscal adjustment and a longer period of fiscal adjustment. In addition, as you know, Greece has sought and has received debt relief.

If you’ll allow me, I’d also like to say because I know that this same question is being asked, for example, in Portugal, that the same is true in the sense that reasonable assumptions were made at the beginning of the program in Portugal and changes, adjustments have been made as the program has progressed; in Portugal, for example, where the fiscal deficit targets under the program were relaxed, in order to strike a balance between the impact of austerity on growth and the need for fiscal adjustment, and is the case in Greece, to try and restore growth and jobs, which is the overall objective.

So maybe just to sum up, the Fund’s fiscal advice on fiscal adjustment remains pragmatic, consistent. It is necessary in countries with high debt burdens and limited recourse to financing, which is the situation in which both Greece and Portugal find themselves now.

Good morning.

QUESTIONER: My name is Mia Sacowin with the news agency of Argentina. I have a question. The last statement by the IMF, except with the (inaudible) Argentina, is the first and the last couple of statements issuing the terms of the official data, which informs and recognizes Argentina’s ongoing work, but does not include incremental sections. So I would like to know if you can comment on this, this change compared with the past, please?

MR. RICE: Okay. Welcome to you. As you noted, our Executive Board issued a press statement on this matter the (inaudible), so I think that’s the best reference point for the IMF’s position on this. Just to say, the Executive Board recognized the Argentine government’s ongoing work and intention to introduce a new national CPI in early 2014. The board noted that Argentina is working to address the shortcomings in its GDP data. And in light of this, as you referenced, the IMF Executive Board called on Argentina to implement an initial set of specified actions by the end of March 2014, further actions by end of September 2014, and end February 2015. And again, this information is in the press statement.

Am I responding to you?

QUESTIONER: Well, I’d like to know if you can comment about the change in this because isn’t it like the first statement in the last couple of maybe two or three, maybe more, that it’s not including any sanction or any mention of a sanction, so it’s kind of a change. So I would like to know if you can comment about that.

MR. RICE: Well, I think the board has taken a very consistent approach to this matter. And again, I think the statement, the press release that the board issued is, you know, is an indication of that, so I don’t really have much beyond that. Again, the board recognized the ongoing work by the Argentine government and its intention to introduce the new CPI in early 2014

MR. RICE: Thank you for your patience, all of you. It’s a busy morning for some reason.

QUESTIONER: Good morning. This current evaluation for the Greek program started the last September and might be ending January. It is an evaluation that has lasted a very long time. Troika claims that Greece has not fulfilled its prior actions and the Greek side claims through leaks that you blackmailed them with demands that can cause a social turmoil. Which side is correct?

MR. RICE: You know --

QUESTIONER: I’m saying that because one of the most difficult issues in this current evaluation is the foreclosures. That’s why I’m saying that.

MR. RICE: You know, as we all know, Greece and the Greek people are facing major and very difficult challenges, and they have been for some time. The objectives of the IMF’s support, which has been unprecedented in many ways, for Greece is to help support Greece in restoring growth, jobs, and overcoming this difficult crisis. I think I can say that that’s true also for our European partners, the European Commission and the European Central Bank.

The issues are difficult, as I say, and in this respect it is not surprising that sometimes the discussions are protracted and difficult. Also, I said to Michael earlier that it wouldn’t be appropriate to go into the details of what they’re discussing on the ground in Athens because the mission is there and discussing with the government. You mentioned the foreclosure issue. It’s an important issue. It’s a very sensitive issue. It is important that it be addressed, but that it be addressed in a way that is socially balanced and fair. And I think, again, that’s been the IMF’s consistent position on this and I’m going to leave it there.

QUESTIONER: There are rumors in Athens today that we are closed in agreement about foreclosures. Can you confirm this?

MR. RICE: Look, I’m not going to comment on rumors and I’m going to comment on the status of the mission. It’s just not appropriate for me to do that.

QUESTIONER: Good morning. I have two questions for you, one is on the recent Euro Group agreement. It seems that Europe is moving towards a banking union by promoting a Cyprus-style bailing of banks, of troubled banks. What does the IMF think of this agreement and what else does Europe have to do to move towards a banking union?

And the second question is whether you think that these prolonged negotiations that are taking place between Greece and the troika, they have already sparked some press comments, especially in Britain, about the danger of Greece exiting the euro zone again, and whether you think that is a danger of too long, prolonged discussions about the current program. Thank you.

MR. RICE: I think on your last question, you know, I think many European officials as well as the Greek authorities have commented on this issue in recent days. And I think they have ruled out the question of Greece exiting from the euro.

Moving to your question on the banking union in Europe, it’s a very important issue. As you may know, the IMF has been saying for some time, including in our Article IV statements on the euro zone, that a more complete banking union in the euro area is critical to reduce financial fragmentation and weaken sovereign bank links. A key element of the banking union is having a strong centralized mechanism with access to funding to ensure swift bank resolution, limiting the overall cost to taxpayers. Ideally, this single resolution mechanism should be based on a centralized authority with power to trigger resolution and make decisions on burden-sharing, so very important.

QUESTIONER: I was wondering if you could speak a little bit about the Fund’s work in bailouts and whether you need a different approach to having restructuring of debt right at the beginning to avoid kind of what happened with Greece, where private sectors had to take the brunt of the losses already some way into the program. As you may have seen, there has been a story about that and I it’s still in discussion, but if you have any thoughts about the IMF staff’s work on this subject. Thank you.

MR. RICE: Thank you. For those who may not have followed this as closely as you clearly have, the IMF, we issued a paper to our board, which our Executive Board discussed in May 2013, so earlier this year, where we laid out a number of issues that had arisen in recent sovereign debt restructurings and related pending litigations. At that time, so May 2013, our Executive Board asked staff to study these issues further. The review of recent experience shows that debt restructurings have often been, as that paper said, too little, too late, thereby impeding economic recovery, deterring investment, and creating opportunities for the private creditors to exit in the run-up to the restructuring and leaving official creditors, including taxpayers, to bear the burden. So that was the -- you know, that’s part of the context.

Where are we? The analytical work that our Executive Board, if you like that our membership, has asked us to do is underway. It’s looking at the pros and cons of the various aspects of this issue. It is focusing on a market-based and contractually based approach. Introducing a statutory framework is not under consideration. In plain English this is not the old SDRM proposal; again, for those of you who have followed the history of this.

So we continue to follow our planned timeline in this work, which would mean probably a further discussion with our board in the summer of next year at the earliest. We would not be seeking a decision by the Executive Board at that point because further consultations and discussions would surely be needed before we get to that point.

So the bottom line, we’re doing our job. We’re getting on with our analytical work in this area as our membership has requested to do. And we have not yet formulated firm proposals.

Let me go online and take a few things that have come up. There is one question on Pakistan. And the question is Pakistan reserves continue to fall despite being in an IMF program. They have recently fallen below $3 billion. Why do you think that’s happening and would that be a factor in the upcoming board review scheduled for December the 19th?

What I can say is the program remains broadly on track with the government meeting all of the quantitative performance criteria by end of September 2013, with the exception of the target on net reserves. Indeed, the board is scheduled to meet on the first review of the program on the 19th. And if the staff level agreement with the authorities is approved, about $550 million would be made available to Pakistan.

There is a question on the Central African Republic Is there anything the IMF is doing or planning to do? And will Managing Director Lagarde be visiting Bangui?

On the last one, there are no plans for the managing director to visit Bangui.

Of course we are very concerned about the humanitarian impact of the crisis in the Central African Republic. It has a devastating impact on the economy, on public finances, on administrative capacity. Real GDP, for example, is estimated to contract by about 20 percent this year, in 2013. We are following it closely. The program that we have had with the Central African Republic is understandably off track. The first review could not be completed. Just to say that political stability and security are needed in the country as a first step to overcome the crisis and a coordinated response from the international community is needed to change the course of recent developments.

There’s another question on Argentina. Is the IMF talking to Argentina about returning for Article IV consultations?

I’ve seen some press reports this morning speculating that the IMF had requested to go back to Argentina for Article IV consultation. There is no truth to that particular story. But what I would say is we have regular contacts with the authorities in the context of the data issues that we discussed previously, including with the new minister of economy. I would say our dialogue with the authorities has been constructive and we look forward to continuing it and we welcome any opportunity to, of course, improve our dialogue with Argentina on economic policies. For now, our work has been focused on the data issues.

QUESTIONER: On the issue of (inaudible) question on the bailing, do you support it or you just don’t have a decision yet?

MR. RICE: No proposals yet. The sequencing is along the lines I described earlier, so there are no new proposals that would apply to any current programs.

QUESTIONER: And the last question is on Cyprus, if you can give us the date for the report.

MR. RICE: Yes, let me just check. I think it’s the -- I believe it’s the 20th. Let’s see if I can confirm that for you. Yes, it will be discussed by our Executive Board on December the 20th. And once the board approves, then disbursement will be made.

QUESTIONER: Thank you very much.

MR. RICE: With that, again, let me wrap. And let me wish you a happy holiday season. And I look forward very much to seeing you in the new year. Thank you for coming and thank you for your questions.


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