Transcript

April 20, 2012

Speakers:
Jose Antonio Meade, Mexico Finance Minister
Tharman Shanmugaratnam, Singapore Finance Minister and International Monetary and Financial Committee Chairman
Christine Lagarde,  IMF Managing Director
Agustin Carstens, Bank of Mexico Governor

MR. RICE: Good afternoon, everyone. Thank you for coming to this joint press conference of the G-20 and the IMFC. My apologies for us running a little bit late, but we will make it up to you.

My name is Gerry Rice, Director of External Relations for the IMF. It's my pleasure to introduce to you today Jose Antonio Meade, the Minister of Finance and Public Credit of Mexico, who is, of course, chairing the G-20; Mr. Augustin Carstens, who is the Governor of the Bank of Mexico.

Mr. Tharman Shanmugaratnam, who is the Minister of Finance for Singapore and Chair of the IMFC; and Madam Christine Lagarde, as you know, Managing Director of the IMF. Each of our participants today will give brief opening remarks, and then we will quickly turn to your questions.

You will be receiving or perhaps have already received three documents: the G-20 Communiqué, a joint G-20/IMFC statement--again, this is a joint conference--and a press release from the IMF. And again, if you haven't received those, you'll be receiving them very shortly. And with that, let me turn to the Chairman. Minister Meade, please.

MR. MEADE: Thank you, Gerry.I would like to thank all of you for joining us during this press conference. I want to recognize the leadership of the G-20 Finance Ministers and Central Bank Governors.

I would like to thank the International Monetary Fund for hosting this meeting. Since February, the economic recovery has continued at a moderate pace. High volatility in financial markets still remains high.

The results of this G-20 meeting are going to be highlighted in the Communiqué; however, I would like to share briefly some of them with you:

The G-20 countries made progress on their commitments to reduce risk in the global economy, increase job creation, as well as taking additional actions for strong, sustainable, and balanced growth. G-20 countries also agreed upon the main priority areas for further policy actions that should be reflected in the "Los Cabos" [G-20 Summit] Action Plan regarding fiscal, financial, monetary exchange rates, structural development policies.

The G-20 is committed to take the necessary actions to secure global financial security. The G-20 welcomed the euro area members' decisions in March to strengthen European firewalls as part of broader reform efforts and the availability of central bank swap lines.

Together with the IMF and the International Monetary and Financial Committee, the G-20 countries reached an agreement to enhance the IMF resources for crisis prevention and resolution. They offered commitments to increase resources made available to the IMF by over $430 billion, in addition to the quota increase under the 2010 reform. This is the result of a broad international cooperative effort that includes a significant number of countries. The resources will be made available for the whole membership of the IMF, are not earmarked for any particular Region.

In order to avoid additional systemic risk in the financial system, the G-20 reaffirmed its commitment to consolidate and implement the international agenda of reforms of financial regulations.

The G-20 members also supported global efforts to combat money laundering and the financing of terrorism and proliferation of weapons of mass destruction. As an important complement to the G-20 financial regulations agenda, countries agreed to follow through on the recommendations of the Global Partnership for Financial Inclusion Report and take the financial inclusion agenda forwards towards concrete results.

The G-20 welcomed the participation of the international organizations on the assessment of the macroeconomic impacts of excessive commodity price volatility and growth, and their identification of policy options that countries could consider as per their national circumstances to mitigate any such effects. The G-20 will continue on inserting green growth and sustainable development policies into structural reform agendas, promote climate finance, and put into operation the Green Climate Fund.

Ladies and gentlemen, the G-20 is making progress on its agenda. There are still additional steps we need to take in order to achieve the goals that the G-20 has set. I have confidence that we will deliver the results we all need and expect to our leaders in June.Thank you very much.

MR. RICE: Yes, thank you, Minister Meade for speaking on behalf of the G-20. Now, Minister Tharman on behalf of the IMFC.

MR. SHANMUGARATNAM: Thank you. I'd like to just say a couple of things on behalf of the IMFC, International Monetary and Financial Committee, about the progress we made today in our joint meeting with the G-20. The most important area of progress was in building up a global firewall by strengthening the resources of the IMF. And I think there are two points I would like to highlight. First was the fact that we had a very broad consensus, a consensus that spanned both the European countries as well as the non-European countries, consensus that spanned advanced economies and emerging economies. And that consensus, particularly in the last few days, many conversations in the last few days, and sealed in our meeting today, was very important, because it was a statement about the importance of strengthening the IMF as a key multilateral institution, in preserving stability, and supporting the reforms needed to restart growth, particularly in the advanced economies, but also to keep growth growing globally. So, it is quite an important statement, and the consensus we reached was a very broad one.

The second point I'd like to highlight that reflects our discussions was about what this firewall does and what it doesn't do. We all agreed it was absolutely essential to have the firewall built up this time. It's not too early to be building up the firewall, not a day too early, and to complement the firewall that has been built up in Europe. But we also felt that the real solution to the crisis does not have to do with firewalls. The firewall is a necessary but far from sufficient condition to resolving this crisis. The real solution has to do with the fiscal and structural reforms that address the real causes of this crisis, particularly in Europe, but also elsewhere. So, that was a very important strand in our discussions. The firewall is absolutely essential, but by itself it is not sufficient, and the real solutions require attention. And having the firewall in place gives us the confidence to go about these real solutions, which are multi-year in nature. It's going to be a long journey. There are pitfalls, there will be setbacks, and if we didn't have this firewall in place, we wouldn't have confidence to be able to embark wholeheartedly on these reforms. So, that is what I'd like to emphasize from our discussions today.

MR. RICE: Thank you, Minister Tharman. And to the Managing Director, please.

MANAGING DIRECTOR LAGARDE: Well, thank you very much to all of you, and good afternoon. I think I would like to begin by thanking publicly all members of the IMF that have contributed to developing this global firewall, or this global umbrella, as you will, which, as was just mentioned, is over $430 billion. You will be receiving in the press release that will be communicated very shortly after this press conference the tally of countries that are participating. You will see that there is a small group of very sizable countries that are participating but whose identified number is not spelled out because they still have to go home, ommunicate properly back at home, and then consolidate, but those countries include the likes of Russia, India, China, and Brazil.

We have received sufficient formal, specific, and detailed pledges that take us north of 360, and the balance between 360 and more than 430 is these commitments that we have received but that are going to be communicated properly back at home, and that will be obviously governed by the bilateral loans that we at the IMF are going to begin working on in the days to come, starting next week, actually. This has been a huge effort, but it has been an extraordinary group dynamic that has worked--extraordinary in the last two days.

I would like to pay special tribute to obviously members of the euro zone who were the first ones to come in who said, "We will pledge $200 billion." Shortly, in the process of increasing that firewall, Japan was the first country to join the group, and to actually take the lead, because after Japan, quite a number of countries came in, with numbers, without numbers, sometimes their numbers being expressed collectively because that's the way they want to present it, and that's perfectly fine.

What is important to us at the IMF is that we know that we have commitments that are north of $430 billion, and that almost doubles the lending capacity of the Fund. It really shows the resolve of the international community to have available the tools in the toolkit to resist and defend against crisis, and I couldn't agree more with what Chairman Tharman has indicated, that is, this is extremely important, necessary, the expression of collective resolve, but it's also predicated on the statements, the affirmation that we have received from many countries, including this morning and last night, that they are going to tackle the combination of the necessary growth and the fiscal consolidation, while working on their structural reforms.

So, certainly, I leave these meetings--with whom we have worked really exceptionally well and we have formed a team, and I would like to associate Governor Carstens--with really a sense of accomplishment and a sense of collective drive from the international community to actually tackle the right issues at the root and to have the necessary tools in the toolbox. So, we shall make use of that wisely in accordance with the rules, with due regard to making sure our creditors' interests are well protected, with the appropriate risk mitigation strategy in place, and by doing so, we will certainly, I hope, contribute to more stability in the economic sphere. Thank you.

MR. RICE: Thank you, Madame Lagarde. Now to your questions, please. Could you identify yourself by name and affiliation and also to whom you are addressing your question would be helpful.

QUESTION: One of the concerns we have heard over the last few days from advanced and emerging economies, including some that are contributing to the IMF fundraising, is that Europe did not do enough on its own firewall. Do you share any of those concerns, I am interested, Madame Lagarde and Minister Tharman? Do you share any of those concerns? Do you feel like this issue is settled in terms of the European firewall, or do you think there is still more that needs to be done from Europe's end for its own resources?

MANAGING DIRECTOR LAGARDE: I will give you our point of view, and that is the IMF assessment of what has been done. We take it as a whole. We take all the efforts put into this situation by the members of the euro zone, and that includes the national measures taken by some of the members--and I think of countries like Italy and Spain, for instance. We take the fiscal compact that they have put in place with strengthened discipline, more sanctions, and this momentum between the national budgetary process and the European Commission review and the peer review. We look at decisions taken by the European institutions, including in particular the European Central Bank, whether it is with the long-term refinancing scheme or otherwise. And we take the increased firewall, which clearly puts the total commitment of the euro partners to EUR 800 billion, which if converted appropriate is in the range of $1 trillion. So if you package that all together, we think that the toolkit is sufficient to address the situation, and it certainly demonstrates the political determination to strengthen and defend the zone.

MR. RICE: Mr. Tharman, would you like to add?

MR. THARMAN SHANMUGARATNAM: Just to add that, at least from my perspective as IMFC Chair, whether Europe has done enough to build up its firewall depends, really, on its reforms. If its reforms lose credibility, if its reforms lose momentum, then, quite frankly, the firewall is not enough. So it depends entirely on the commitment to reform, and what we do sense from our European colleagues is a very real determination to move ahead, including in the countries that are going through the greatest difficulty currently, including Spain and including Italy, despite the political obstacles that they are facing, a very real determination. So I think we should move a little away from the numbers game of looking at whether 500 plus 200 is enough and so on and so forth to looking at the reforms and the ability to persevere with the reforms.

MANAGING DIRECTOR LAGARDE: If I can just add one thing, actually, what happened today is a demonstration by the international community that they believe in that and that they are prepared to support that, not just in the euro zone but in many other places, because that is for all members.

QUESTION: A question for Jose Antonio Meade and either Mr. Tharman or Madame Lagarde. Some significant countries in the G-20 have chosen not to contribute to this collection. They have expressed concerns about the extent to which the IMF can be counted an honest broker or an impartial broker in the administration of those funds as between European and non-European countries. I wonder if we could get a comment from both the G-20 and the IMF on that.

MR. MEADE: At the G-20 level--and I would ask Agustin if he wants to comment further--but at the G-20 level, I think there was broad support for the measure; there was broad recognition that both at the euro zone and this process of strengthening the IMF was relevant. There was recognition, as Minister Tharman has said, that more needs to be done. But I think at this stage, what we have seen now in terms of a toolkit is a more varied toolkit and more profound elements in order to face the crisis, and I think that taken together, the process that we have made is very relevant, and the consensus at the G-20 level was that this is so. They were very supportive of the efforts made. The bulk of the G-20 members not only chose to contribute--many of them explicitly put an amount to their name--many of them, such as Mexico, committed to participate in an effort in a proportionate fashion.

So I would say that the measures that were announced today and the agreements that were reached at the G-20 level had a very broad level of consensus which I think firmly states that the whole of the community is very comfortable with the way that we have moved forward and the amount of efforts and policy measures that have been put forth.

MR. CARSTENS: And I just would like to complement that measure and say , as Tharman has already mentioned, that the whole effort of stabilization and of overcoming these very difficult situations that have been with us since 2008 are going to be--this process is composed of many elements, and this effort of increasing the IMF's lending capacity is a very important step forward at this particular point in time, but it is only one element in that respect. And I think different countries have contributed in different fashions in moving forward. So I think that what we should celebrate today is that cooperation and collaboration at the international level is working, and each country is contributing through their own means and through their own capacities.

MR. RICE: I am Anna Varone from Clarin Argentina. This is a question for Jose Antonio Meade. Before the meeting of the G-20, Mexico said that it was going to take to the G-20 the problem of the nationalization of the oil company in Argentina, YPF. I wanted to know if there were discussions on this subject. And also, there is kind of talk that Argentina, because of this and many other things, should be getting out of the G-20. There is today an editorial in The Washington Post. I would like to know if there is any reaction inside the G-20 about this.

MR. MEADE: The G-20 is a forum for constructive consensus. It is a forum for coordination of policies. It is a forum that has brought its best, I think, in these times of crisis in order for the international community to get together and decide how we should proceed. It is a forum that is committed to free trade and that advocates free trade as a rule. It is a forum that recognizes the importance of avoiding protectionism, which was highlighted at the communiqué level. But it is not a forum that deals with specific disputes or bilateral issues, so in that sense, I think that what you will see in the Communiqué--and that reflects, I think, what was debated at the G-20 level--is that we remain committed as a Group to free trade, that we remain committed as a Group to international protectionism, that it is a forum that privileges coordination and that privileges the things that we agree upon and that are reflected in the Communiqué, and it is not a forum, I think, for bilateral debate.

QUESTION: My question is as far as we met last year at the same place, where do we stand as far as corruption and poverty rising around the globe, even though many countries are contributing to the IMF and the World Bank, but still, back home, people are living in poverty. And finally, how is the high rise of oil prices impacting the major--from the G-20 plus especially the smaller nations. As far as corruption is concerned, a lot of poor countries, their corrupt ministers are sending money from back home to overseas, especially in the Swiss banks. I am talking about India and many other countries.

MANAGING DIRECTOR LAGARDE: I will give you two examples, because your question is more addressed when it comes to particularly poverty and development to the World Bank than to the IMF. But it is not irrelevant. If you look at poverty, for instance, we are, at the same time as we are raising those resources for advanced economies, pushing hard on increasing as well the Poverty Reduction and Growth Trust that is being used for the low-income countries to actually help them with specific financing that is lent at totally concessional rates, so concessional that it is zero interest. So that pocket of money I want to be increased and available for low-income countries and for the lending that we do with them.

On the issue of corruption, I will give you another example. There are some countries with which the IMF has programs and discussions which actually include in their package anti-corruption measures, anti-corruption legislation, and we highly welcome that.

Now, in terms of the consequences of the oil price hike, we have prepared for the G-20 on the topic of commodity prices a first study and we are completing a second study on two things--how does the price of commodities impact on macroeconomic policies, and there are some very interesting findings in there; and the second is about the subsidies and how subsidies used in relation to fossil fuel, for instance, is really of pretty bad consequences for fiscal purposes, because it reduces the revenue, it generally increases the public spending, especially when the price of oil goes up as we forecasted in our WEO, and it has no distributive effect because it generally goes to those who need it less.

So we do encourage our members--and there are some that are doing it--to actually remove the subsidies from the fossil fuel.

MR. MEADE: Just briefly to comment that in terms of the G-20, there has been for the last three or four years a development track that is very relevant to that agenda. We are concentrated not only on the architecture of the financial system and the regulation of the financial system but also on identifying good policy measures that can be recommended to the G-20 membership on issues that have to do with poverty reduction and that have to do with the creation of jobs and the recovery of employment.

So I think those are all relevant agendas also at the G-20 level, where we have reaffirmed that commitment with transparency and with dealing with corruption as well.

QUESTION: I have a question for the contributors to the new resources. Since you welcome the European recent moves, are you now comfortable with that, if need be, the IMF would lend more to the euro zone when some countries have been worrying about the exposure of the IMF to euro zone countries? And if you could also help me understand or translate what you mean with this paragraph--"Should it become necessary to use these resources, adequate risk mitigation features, conditionality and burdensharing among official creditors would apply as approved by the IMF Board." Does that mean there would be no restrictions if there were more euro zone loans, as some countries suggest that there should be a veto on your zone loans?

MR. CARSTENS: Well, basically, what it means is that the way the Fund traditionally operates in granting support to countries will apply. Starting with your first comment about subjecting the Fund to a large exposure on Europe, if we go back to the Communiqué of the G-20 in the meeting in Mexico last February, it was stipulated that we were going to act as we did today after the euro zone would enforce and complement its own firewall. So, first, it has to be noted that the euro delivered on its commitment, and that was very important for many countries to take the next step, and that is to enhance the lending capacity of the Fund.

It has been very well-established, and it was discussed in the meeting of the G-20, that these resources are for the broad use of the IMF, and it will be operated in the same way as it is always done at the Fund. So this is an increase in the lending capacity of the Fund, and therefore, and also to safeguard Fund resources, conditionality will be applied, and that is, I would say, one of the main elements that differentiates the Fund, that allows the Fund to go and support countries in difficult circumstances, and that is also part of the reason that gives confidence to other countries to pledge resources precisely to complement the Fund's lending capacity.

QUESTION: My question is if you think there are some countries that might trigger another crisis and might be a priority for lending. And the second thing is if you think that organized crime can inhibit investment and contribute somehow to unemployment and economic problems.

MANAGING DIRECTOR LAGARDE: You know, I have to say I was slightly distracted, because I was trying to calculate in my head what is the total capacity to commit for the Fund at the moment given the increase that has just taken place, and we are north of $1 trillion, actually. So I was a bit mesmerized by the amount. Sorry about that.

But your question was about how about if another country needs support, and what would then be the approach by the IMF in such circumstances.

QUESTION: If you have a specific country that you might think can trigger another crisis--besides Europe--

MANAGING DIRECTOR LAGARDE: Well, the IMF, as I said yesterday, now has 188 members, and it is here for each and every one of the 188 members. Now, whether it is a systemic crisis or a non-systemic crisis, a low-income country, a middle-income country, an emerging or development country, an advanced economy does not matter. The Fund is here for all the membership. So we would put together the appropriate measures, conditionalities would apply, and that is really one of the strengths of the IMF which makes it a very, very secured creditor in a way, because we only lend money in consideration for the country doing what is necessary for it to get back on its feet. In some cases, there is burdensharing--and that has been the case with all countries in the euro area, and I don't see why that would change, as Governor Carstens indicated. But of course, we would be there for those countries, and it is precisely for that reason that we had such a broad assessment of risks. It was not focused on the euro zone. It was the entire membership.

QUESTION: I meant are there any more vulnerable than others.

MANAGING DIRECTOR LAGARDE: The future will tell. Que sera, sera.

MR. RICE: Let me invite you all to a seminar taking place right now, where you will be able to hear Governor Carstens and Madame Lagarde again.