Transcript of a Conference Call with a Senior IMF Official on Greece and AIP

IMF News, June 22, 2017

Source details

Canonical URL: Transcript of a Conference Call with a Senior IMF Official on Greece and AIP

Date of publication: June 22, 2017
The Managing Director told the Eurogroup she was ready to go to the IMF Executive Board and recommend approval in principle (AIP) of a new IMF Stand-By Arrangement (SBA) for Greece.
AIP is described as an unusual procedure, used in the 1980s in similar stalemate situations.
Rationale for pursuing AIP now:
- Signals that the IMF believes Greek policies are on the right track and worthy of IMF support.
- Allows movement forward without compromising the debt relief requirements ultimately needed to release IMF resources.
- Provides Greece and its creditors breathing space to avoid a cash crunch next month and supports Euro area and Greek financial stability.

Current status:
- Significant movement by European creditors has occurred over recent months, including "additional measures and additional specifications" referenced in the Eurogroup statement.
- However, the IMF does not yet have "enough on the debt relief side to meet the debt sustainability requirements of the program."
Creditor complexity:
- The Greek case involves "17 creditors" operating in a currency union, making provision of debt relief inherently difficult because of moral hazard concerns and bailout risks.
- The IMF characterizes the remaining issues as a political contest requiring more time for convergence among European partners.
On deadlines:
- Past uses of AIP sometimes included deadlines but not always; reference made to the 1980s practice and the Argentina case.
- The IMF has not decided whether to propose a deadline in this instance; the Managing Director will decide what to recommend to the Board.
- The Senior IMF Official indicated that in the present context a hard deadline may not help resolution because outstanding issues concern underlying assumptions, instruments, and uncertainty treatment that require time to work through.

Document and Board timetable:
- The Managing Director will put together the staff report for the Board. Documents were expected to be finalized "in the next week or so."
- There is a clearance procedure and "a couple of weeks to consult the capitals" after issuance to the Executive Board. The Managing Director anticipated this would take the process into July.
Financial magnitude and modality:
- When the request for AIP for use of Fund resources is put to the Board there will be an amount; it "has not been finalized yet."
- The Managing Director said in the press conference that it would be "well within the IMF’s normal access limits," not exceptional, precautionary, and she mentioned a figure of up to US$2b to offer a magnitude.
- Characterization of the arrangement: precautionary—member not required to draw but could do so at any time; IMF terms may be less favorable than ESM terms, so Greece might choose to draw or substitute if desired.
Purpose of IMF involvement:
- Principal objective was not to gain additional leverage but to signal IMF support, help articulate a focused macroeconomic policy agenda in the Fund’s own format, and provide breathing space for creditor convergence while avoiding an immediate cash crisis.
- The IMF’s engagement leverages its expertise in crisis management and macroeconomic program design and is consistent with a catalytic financing role and burden sharing in past crises.

The IMF’s conditional stance:
- The IMF maintains it will require a debt relief package sufficient to declare Greek debt sustainable before releasing IMF resources.
- The Fund will continue to push its long-run assumptions used in debt sustainability assessments.
On market reaccess and program success:
- The Senior IMF Official stated: if the IMF did not believe there was a good chance of concluding the program next August with Greece in a sustainable position and ready to return to markets, it would not pursue this route.
- Targeted end of ESM Program / durable exit objective: August 2018.

Interaction with Eurogroup and Germany:
- The IMF notes the debate over debt relief is primarily a political process within the Eurogroup; many members support a rigorous debt relief package.
- The Senior IMF Official argued that coming onboard with AIP does not change the IMF’s conditions for providing resources and does not remove the IMF’s push for sufficient debt relief.
Use of deadlines as catalyst:
- The official expressed skepticism that a hard deadline would necessarily facilitate resolution in this context, contrasting it with the 1980s "chicken and egg" situations where deadlines were catalytic because creditor coordination could only follow IMF approval.
- The official acknowledged that impending payments (e.g., July payments) have been a motivator for action in recent months.

Contact: IMF Communications Department, MEDIA RELATIONS, Phone: +1 202 623-7100, Email: MEDIA@IMF.org
Ground rules: The briefing was on the record with attributions to a Senior IMF Official.

Transcript of a Conference Call with a Senior IMF Official on Greece and AIP, June 22, 2017 — IMF Communications Department