November 2001 IMFC Statements

IMFC Ottawa Meeting

Austria and the IMF

Belgium and the IMF

Germany and the IMF

Denmark and the IMF

Spain and the IMF

Finland and the IMF

France and the IMF

United Kingdom and the IMF

Greece and the IMF

Ireland and the IMF

Italy and the IMF

Luxembourg and the IMF

Kingdom of the Netherlands-Netherlands and the IMF

Portugal and the IMF

Sweden and the IMF

Statement by H.E. Didier Reynders
Minister of Finance of Belgium,
In his capacity as Chairman of the EU Council of
Economic and Finance Ministers
International Monetary and Financial Committee

Ottawa, Canada
November 17, 2001

1. I submit this statement in my capacity as Chairman of the EU Council of Economic and Finance Ministers. It focuses on recent economic developments and policies, in particular in the EU, on the reform of the international financial architecture, on strategies related to poverty reduction and on the fight against abuses of the international financial system, including the financing of terrorist activities.

2. We express our deeply felt solidarity with the United States of America after the terrible events of 11 September. In addition to being a human tragedy, the terrorist attacks have important political, diplomatic and security consequences. They also have an economic and financial impact in the short run. These events reinforce our conviction that close international co-operation in financial and economic matters remains indispensable.

3. This meeting of the IMFC is the last one before the introduction of euro notes and coins on 1 January 2002, which represents the conclusion of the project to establish an economic and monetary union in Europe. The changeover to the euro is an historical event which will contribute to macroeconomic and financial stability in the euro area.

4. Finally, let me take this opportunity to thank Stanley Fischer and Michael Mussa for their outstanding contribution to the Fund, and welcome Anne O. Krueger, Kenneth S. Rogoff and Gerd Häusler with whom EU Member States look forward to working in the future.

Macro-economic developments and world economic outlook

Economic growth also in the EU has lost momentum...

5. The EU economy has been affected, more than originally thought, by the slowdown in economic activity in the United States and in the rest of the world since late last year. The tragic events in the US have further increased the uncertainties. Thus, the short-term prospects for growth in the EU are clearly dominated by downside risks. Nevertheless, we expect that the slowdown will be temporary and not deep, given that the European economy is not affected by major imbalances. Based on actions already undertaken as well as sound underlying conditions we expect growth to pick up during 2002.

6. The European Union has already demonstrated its ability to react rapidly and appropriately in order to support confidence : the ECB and other EU Central Banks, immediately after the attacks, took measures to safeguard the smooth functioning of the financial markets and reduced their key interest rates in response to declining inflationary pressures, while EU political authorities have taken promptly the necessary temporary measures to alleviate specific problems for airline and insurance companies. We will continue to monitor developments closely, and remain committed to maintaining close economic policy co-ordination and assuming our responsibilities for global growth.

7. Several factors will support the European economy and favour the pick up of growth expected for the course of next year : (i) the EU economy maintains solid fundamentals, which have been substantially improved in recent years, contributing to strong output growth, low inflation and substantial job creation; since the EU's economic fundamentals are significantly improved, the EU economy stands stronger than in earlier downturns ; (ii) the fall in inflation and inflation expectations, recent tax reductions and favourable financing conditions are creating the conditions for a gradual strengthening of domestic demand in the EU as a whole and (iii) ; the low oil prices could contribute decisively to better conditions for stability and growth in the world economy.

8. Macroeconomic and structural policies will continue to be geared towards a well-balanced economic expansion and the full realisation of current growth potential. The challenge is to restore strong, non-inflationary economic growth.

- Thanks to the fiscal consolidation already achieved and the favourable implications for cyclical stabilisation of implementing the SGP, whereby achieving budgets close to balance or in surplus allows the automatic stabilisers to operate fully in the event of a cyclical downturn, the EU economy is now in a better shape to deal with short-term cyclical fluctuations. We confirm our commitment to the SGP.

- On the longer term, we are determined to co-operate closely and to continue pursuing sound structural reforms, with a view to accelerating the Lisbon process and thus raising the productive potential of Member State economies, in order to achieve higher rates of sustainable economic growth and employment creation in the long run. These further structural reforms aim at : achieving greater competition in product and capital markets ; adding flexibility in labour markets ; reinforcing the efficiency and the integration of EU financial services ; encouraging entrepreneurship ; fostering the knowledge-based economy ; and enhancing environmental sustainability of growth and development. the context of worsening international circumstances.

9. The external environment of the EU remains challenging. World economic growth has slowed markedly, and the short-term downsize risks to growth have been compounded by the recent tragic events of terrorism in the US.. Restoring consumer and business confidence in major economies remains key to ensure a smooth and rapid recovery of global growth. Overall, we expect growth to recover during 2002 also as a result of appropriate macroeconomic management in major industrialised areas. In this context, it is important to stay committed to an open multilateral trading system. We call on all actors to join us in supporting the launch of a new WTO round.

10. Growth in the US has decreased abruptly. While some adjustment towards a sustainable growth path was needed as it could help to curb both internal and external imbalances that had built up during the expansion, the downturn of growth has been sharper and more protracted than expected. The recent tragic events of terrorism have already had a negative impact on consumer confidence, which is key to the US short-term economic outlook, and have further increased the uncertainties and downside risks for global growth prospects. Macroeconomic policies have already been geared to counter the economic slowdown. On the fiscal side, recent measures may prove useful to sustain consumer confidence. At the same time, however, care should be taken to keep the public finances on a prudent course over the medium term, thus also addressing concerns related to low national savings and the large current account deficit.

11. In Japan, continued weak economic performance, largely due to weak domestic demand but compounded by the slowing world economy, remains a matter of concern. The weak performance is aggravated by the lack of confidence of consumers, investors and enterprises, resulting from long-term structural difficulties, adverse macroeconomic developments, and the failure of policy to address either of these successfully. The macro-economic policy stance should remain as supportive as possible to domestic demand. On the fiscal side, efforts should primarily concentrate on increasing the quality and efficiency of public expenditure and on tax reforms aimed at achieving long-term efficiency. A medium-term programme of fiscal consolidation is necessary in order to bring the public debt burden under control, and should also improve investor confidence. The restructuring and modernisation of the financial sector, accompanied by reforms in the corporate sector as well, cannot be further delayed.

12. Global developments have been affecting several emerging market economies, especially in Asia and Latin America, as external financing conditions have become more difficult. The EU stresses the importance of further intensive efforts to implement structural reforms in all emerging market and transition economies to minimise vulnerabilities to external shocks.

In Latin America, the contraction of export markets has been compounded by a slowdown in capital inflows. The EU strongly supports the efforts undertaken by the Argentine authorities in the framework of the adjustment programme backed by the international financial community. The EU also expresses strong support for the Turkish efforts to reform the economy and strengthen its public finances.

The success of both Argentina and Turkey's programmes hinges on their rigorous implementation in combination with support from the international community, including from the private sector. In this regard, we welcome the Argentine authorities' efforts to engage creditors in a debt operation aimed at achieving a lasting easing of financing requirements, and look forward to an outcome that will support medium-term financing sustainability and significantly alleviate the country's foreign debt.

Improvements in Russia's macroeconomic and balance of payments situation are encouraging. To complement macroeconomic stabilisation, continued and deep structural reforms are paramount. Maintaining external sustainability is also necessary to meet in full Russia's financial obligations. Recent progress in the transformation of Russia's regulatory framework is encouraging, but further efforts are required to improve the investment climate, which is key to a sustained high rate of domestic and foreign investment and, therefore, to sustainable growth.

In emerging Asia, the economic deceleration has been triggered by external shocks, particularly in the technology sector, undermining growth prospects in the region and with it the resolve for still difficult corporate and banking sector restructurings. Confidence has weakened, partly as a result of the lack of restructuring. Despite significant progress in reducing vulnerabilities, including more flexible exchange rates, higher levels of foreign exchange reserves, and more prudent liability management policies, further efforts are needed in this area through accelerated financial and corporate reforms, as well as efforts to keep fiscal policies sustainable over the medium term.

For the poorer developing countries the EU is concerned over the possible impact of the global economic slowdown. Growth in the poorest countries will be reduced, and exacerbated by falls in commodity prices. This could in some cases impact negatively on debt sustainability, and more broadly on efforts to reduce poverty and on international efforts to achieve the Millennium Development Goals. The EU stands ready to address this challenge. The IMF must continue to assist countries to achieve and maintain macro-economic stability during this period, while, along with the MDBs, ensure that efforts to address the negative impacts on the poor are vigorously addressed.

13. Volatility in financial markets has accompanied the global economic slowdown. Stock markets have been affected worldwide but have so far shown resilience. We reaffirm that appropriate energy prices and stable oil markets are important to help restore sustainable growth worldwide.

Developing a comprehensive strategy to reduce poverty

14. Development has to start with and by the countries themselves. Economic growth is crucial to sustained poverty reduction, but the EU also recognises the fundamental role of institutional and social reforms, and of social inclusion, in the development process. Sound economic policies and public financial management, as well as more efficient domestic resource mobilisation through market-oriented reforms, constitute the first pillar of any poverty reduction strategy. The EU is committed to supporting development and implementation of PRSPs and will continue to work closely with developing countries, donors, particularly the international financial institutions and the UN.

15. Developing countries, with the help of the international financial community where appropriate, need to avoid, and to address unsustainable debt dynamics that lead to resources constraints, poor growth and the continuation of poverty.. The EU welcomes in this context the results achieved in the framework of the enhanced HIPC initiative. 24 countries have reached their "decision point" and have started to receive significant debt relief. The EU and its member states play a leading role in financing the initiative and urge all creditors to provide, on a timely basis, their share of multilateral financing and bilateral debt reduction. They also encourage bilateral creditors to go beyond the HIPC targets, by agreeing to commit to provide 100 percent reduction of ODA and eligible commercial debt. Remaining HIPCs face complex and difficult situations as most of those countries are either involved in conflict or emerging from one. We believe that the primary objective of the enhanced HIPC initiative should continue to be the restoration of debt sustainability and should not be modified. We thus welcome the fact that the IMF and the World Bank will systematically assess each HIPC's debt sustainability at its completion point: following this review, additional debt relief could be provided for those countries that, after having reached the completion point, continue to experiment an unsustainable debt burden, due to fundamental changes in economic situation, motivated by exogenous factors. This possibility was already envisaged in the framework of the enhanced HIPC. It is now all the more relevant as the current state of uncertainty regarding future developments of the world economy and the possible further deterioration of these countries' access to world markets might have, in some cases, negative consequences on the exit from unsustainable indebtedness.

16. Finally, it is necessary to develop effective trade and investment related policies, and to improve consistency between trade and development policies.

    First, industrialised and middle-income countries must improve access to their markets for LDCs' products. The current trade preferences framework still excludes many sectors which are key for LDCs, particularly agriculture and textile. The EU has recently taken the decision to grant tariff-free access to all LDCs' products, except military weapons, in the context of the "everything but arms" initiative. Subsequently, the 3rd UN Conference on the LDCs in May adopted the objective of duty and quota-free market access for all products originating in the LDCs. Estimates show that if the US, Japan and Canada follow the EU lead, LDC exports will increase by between 10 and 15 per cent. We therefore strongly encourage others to follow the same route.

    Second, it is important for LDCs to place themselves in a position to reap fully the benefits from openness to international trade by adopting appropriate domestic policy reforms. LDCs which want to do so should be supported in their process of trade liberalisation. The Fund should intensify its cooperation with the WB, the WTO and other UN and non-UN agencies, currently dealing with trade-related issues within the context of the Integrated Framework Initiative in providing assistance to LDCs.

    Third, a favourable international environment for investment and trade is key. A new multilateral trade round should be launched at the 4th WTO Ministerial Conference in Doha in November 2001. It must make a major contribution to global economic growth, respond to the interests of all WTO members, in particular developing countries, strengthen the multilateral trade system and be prepared in a transparent and inclusive manner taking into account the need for a dialogue with civil society.

17. The IMF, the World Bank and the other Multilateral Development Banks (MDBs) play important complementary roles in fostering the world's economic growth, poverty reduction and stability. Closer co-ordination at the country and institutional level between the Bretton Woods institutions and the regional development banks is therefore crucial. Within this framework, it is essential that the IMF, mainly through its Poverty Reduction and Growth Facility, continues to foster stable macro-economic frameworks consistent with poverty reduction efforts, and sound public expenditure management systems. An important part of this is to continue to take forward the commitments made in the IMF `Key Features of the PRGF' paper, including efforts to improve ownership, pro-poor budgets, and poverty and social impact assessments. Further steps in enhancing co-operation with the World Bank and other MDBs are necessary to ensure more efficient conditionality, with a view to promoting also other objectives of multilateral programmes, such as good governance and financial sector strengthening.

18. Finally, the EU member states welcome the participation of the World Bank and the IMF in the important International Conference for Financing for Development which will be held in March next year in Monterrey, Mexico. Our primary objective should be to enhance the mobilisation and effective use of resources for developmental purposes, rather than trying to redefine governing principles for the global finance and trade systems. While the UN can help to provide political impetus and useful advice, it is the IMF, the World Bank and WTO that have the operational responsibilities within their respective mandates. Co-operation among rich and poor countries for achieving sustainable development and finding stable financing is of great importance. Where developing countries take strong actions to reform their economies and take responsibilities for their own development, they should be adequately supported by multilateral and bilateral financial resources. By assisting in the preparation of this conference participation of the IMF should ensure that macroeconomic and financial stability is given the weight it deserves for development strategies in the 21st century.

Strengthening the fight against abuses of the global financial system

19. Major initiatives have been launched in the last few years to fight against abuses of the financial system, including money laundering, harmful tax practices and insufficient regulatory frameworks and practices in the financial area. Significant progress has been achieved during the past year, but much remains to be done, and this fight must be enhanced to combating efficiently the financing of terrorist activities. The EU calls on the international community to intensify its cooperation, and stresses the need for dialogue.

20. The EU is committed to taking rapid and coordinated initiatives to combat the financing of terrorism. We are currently taking concrete steps and making progress in several fields, including through : the adoption of the draft directive on the prevention of the use of the financial system for the purpose of money laundering ; the adoption of the framework-decision on the execution in the EU of orders freezing assets or evidence, the scope of which is to be extended to terrorist-related crimes ; support to the broadening of the mandate of the Financial Action Task Force on money laundering so as to cover cases linked to terrorism; full backing to the efforts of the FATF in its work on non-cooperative countries and its project to update the 40 Recommendations on important issues such as customer identification. The EU strongly supports the outcome of the FATF special plenary dedicated to the fight against the financing of terrorism and will take swift steps to comply with the special recommendations. It calls on all other countries to follow suit. The EU intends to secure prompt ratification and implementation of the UN resolutions and conventions concerning the fight against financing of terrorism.

21. The EU has shown its collective willingness to fight against money laundering, which is both a potential source of financial instability and a tool for financing terrorism. We reaffirm our strong support to the Financial Action Task Force (FATF) whose Forty Recommendations constitute the anti-money laundering international financial standards. We also support the current revision of those recommendations and will actively contribute to this process ; in this respect, the transparency of corporate vehicles should be enhanced. We welcome the progress made by several jurisdictions listed as non-cooperative by the FATF last year in enacting anti-money laundering legislation and in enhancing related practices. We also congratulate those countries which have made sufficient progress to warrant their removal from the list. However, continuous attention to implementation is needed. In addition, we call on countries listed last year by the FATF which have failed so far to make sufficient progress, as well as those added to the list this year, to take the necessary steps rapidly. EU member states stand collectively ready to implement the coordinated countermeasures recommended by the FATF against the jurisdictions in which no progress has been made, and commit to promote the adoption of such countermeasures worldwide.

22. Article IV reports could include where appropriate a section dedicated to the fight against money laundering and terrorism financing. We welcome the decision by the Fund and the World Bank to include an evaluation of anti-money laundering and anti-terrorism financing measures in Financial Sector Assessment Programmes, Financial Sector Stability Assessments and Reports on the Observance of Standards and Codes, where relevant. We urge the IMF and the World Bank to quickly develop an anti-money laundering and anti-terrorism financing ROSC module, similar to those prepared or under preparation for the other 11 key standards identified by the FSF, and we welcome the creation of a FATF working group to help laying the technical bases of such a module. We support the decision of the IMF and WB to recognize the Financial Action Task Force (FATF) 48 Recommendations, which is the appropriate international standard to combatmoney laundering and terrorism financing. Finally, we support the growing involvement of MDBs in this area.

23. The EU also welcomes the work of the OECD to address harmful tax practices. We look forward to the publication of the OECD 2001 progress report. This work should continue to encourage an environment in which fair tax competition can take place. All concerned countries - OECD Member-states, non-OECD countries and tax haven jurisdictions - should eliminate their harmful tax practices in due course.

24. The Financial Stability Forum (FSF) report on Off-Shore Centres (OFCs) and the related list published last year have induced many OFCs to initiate positive actions to improve their supervisory and regulatory systems and co-operation practices ; the momentum created by those documents 18 months ago should be maintained. These efforts must be sustained over time and we invite OFCs to participate in the assessment programme initiated by the IMF. We also urge the IMF to speed up the programme, increasing as necessary the resources devoted to it, and underline the importance for OFCs to allow a full disclosure of the assessment's results as a sign of their commitment to and progress towards meeting international standards. We ask the FSF to ensure that offshore financial centers' practices enable efficient information sharing with foreign regulators, including in the on-going investigations on suspicions of insider trading in the days preceding the attacks. Finally, we reiterate the need for the international community to ensure a proper and continuous monitoring of progress in this field.

25. We urge the IMF, the World Bank and other MDBs and relevant institutions, each according to its specific mandate, through technical assistance, programme design and policy dialogue, to encourage and assist countries and territories to play their role in fighting against the above-mentioned abuses, in particular money laundering.

Reaping the benefits of financial globalisation through the reform of the international financial architecture

Financial globalisation contributes to growth...

26. The international mobility of goods, services and capital has brought tremendous opportunities for growth and development throughout the world, and must continue to play a vital role in contributing to rising prosperity. At the same time, the EU recognises that the process of globalisation also poses economic and social challenges. The EU therefore stands ready to address these challenges, working in partnership with developing countries, the international financial institutions and in dialogue with representatives of civil society. As part of these ongoing efforts, the benefits and challenges of globalisation, including for development, and the possible responses to those challenges are being assessed by the European Commission in a report to be finalised in February 2002.

... and the Fund has an instrumental role to play in making financial globalisation work for all

27. The reform of the international financial architecture must be pursued in order to reduce the risks posed by financial globalisation and to ensure that its benefits are shared by all, including the poorest. The IMF must continue to play a key role in achieving this aim. The Fund must in particular reinforce its efforts to : help integrate developing countries into the international financial markets ; ensure that conditionality related to adjustment programmes is efficient and appropriately focused ; complete and implement fully the framework of principles and tools for involving the private sector in financial crises ; strengthen its surveillance activities, including through the assessment of compliance with standards and codes and the monitoring of financial vulnerabilities ; and strengthen its own governance and accountability. We thank the Managing Director for his informative reports on all these issues. Our comments are attached for information.



Capital account liberalisation

1. The increased mobility of goods, services and capital while creating opportunities for growth and poverty reduction can also increase the vulnerability of national economies to external developments. This is particularly true in the financial area, where emerging market economies are exposed to short-term volatility at times associated with larger capital flows.

2. Capital account liberalisation needs to be conducted with an appropriate sequencing and backed by stable and credible macro-economic, structural and financial sector policies (including through the adherence to standards and codes). Moreover, opening access to foreign capital is a complex process that cannot be addressed by a standardized approach as exemplified by the European experience since the Treaty of Rome. It must be based on a voluntary, country-owned process and on analysis of short-term risks and longer-term advantages.

3. The IMF, with its central responsibility for the functioning of the international financial system, should be the leading institution to provide guidance to Member States that intend to liberalize their capital account in order to minimise risks, and to ensure that the economic efficiency gains which can be generated by the growing flows of international capital can benefit to all.

4. The EU Member States support the Fund's increased attention to financial sector issues. The Fund has already stepped up financial sector surveillance in its Article IV consultations, and through specific assessments such as ROSCs and FSAPs/FSSAs. We believe it must further increase its involvement in this area in the context of its surveillance activity, policy advice, technical assistance, and support to members facing balance-of-payments need. We invite the IMF to keep on developing, in close co-operation with the relevant organisations, a pragmatic, coherent and integrated framework for an orderly and well-sequenced capital account liberalisation. In this perspective, we welcome the recent IMF studies and the impetus given by the Managing Director to make progress on capital account liberalisation. We encourage him to further pursue his efforts in this direction.


5. The EU welcomes recent efforts to streamline conditionality in Fund-supported programmes. There is scope for streamlining conditionality. While reaffirming the need for strong conditionality, ownership of IMF-supported programs needs to be enhanced, as a key for successful program implementation.

6. Recent experience has demonstrated the strong interlinkages between micro- and macro- dimensions of sustainable growth. The inclusion of structural conditionalities in IMF programmes should be geared toward removing deep-rooted structural obstacles to macroeconomic stability and growth, such as weak financial sectors. Those conditionalities may also help improve markets' confidence in programmes, thereby enhancing the catalytic role of the Fund.

7. We encourage the Fund to continue its work to simplify the design of conditionality in its programmes and to develop a proposal for a revision of the 1979 conditionality guidelines by the 2002 Spring Meetings. The preliminary lessons drawn from last months' review of experience in streamlining conditionality show the benefit of flexibility in implementing this approach. Structural conditionality needs to remain well targeted, effective, manageable and legitimate, and as any other element of conditionality should safeguard IMF resources. Against this background, the revision of the conditionality guidelines should start from the following principles :

- The central test for the inclusion of all policy measures, including structural reform measures, in the conditionality of Fund-supported programmes should always be whether it is critical for maintaining and/or re-establishing macroeconomic and financial stability, and for a program's objectives. Accordingly, structural conditionality could be assessed at two levels so as to facilitate the judgment whether to include certain measures in programmes : (i) structural measures should primarily aim at strengthening macroeconomic policies, in particular at improving the stability and resilience of the financial sector, as appropriate ; (ii) the case for including other structural conditions would need to be proven ;

- Conditionality may also include measures aimed at facilitating private sector involvement to ensure the short and medium-term sustainability of financing programmes ;

- Ownership is a key ingredient for the successful implementation of programmes. Ownership should not lead to a weakened conditionality. While preserving the need for strong and effective conditionality, we call for a strengthened dialogue between the country and the IMF so that the design of the programme reflects appropriately the specific circumstances and preferences of the country concerned ;

- Coordination with the World Bank must be further improved, while preserving the responsibilities and the accountability of each institution. The two institutions could build on the experience so far accumulated in dealing with the financial sector and HIPC/PRSP. In particular, joint bodies may prove useful to ensure consistency between conditionality of both IFIs, especially as regards Middle-Income Countries ;

- The general approach to IMF conditionality should be seen as a process and therefore needs to be reviewed regularly. In addition to such reviews, post-program assessment of the relevance of measures should be made more systematic. The EVO could provide useful information and inputs to this discussion.

Private Sector Involvement

8. The EU Member States acknowledge and support the efforts made so far to involve private creditors in the resolution of financial crises. However, also in light of recent experience, more work needs to be done to ensure a transparent, consistent and coherent implementation of the agreed PSI framework, and to ensure that PSI is a standard element of crisis resolution. This may entail further strengthening the current framework and making it more predictable to market participants. We urge IMF staff and management to address the following issues :

    - Better information to the Executive Board about a country's payment capacity and prospects for regaining market access is needed when designing and reviewing programmes. This is necessary to enable the Executive Board to make a judgment about the appropriate degree and form of PSI as compared to official financing and adjustment measures. Moreover, programme documentation also needs to contain a more detailed financing plan setting out projections of current, committed, and potential sources of financing including an explanation of underlying financing assumptions. It should also include a deeper and more detailed analysis of the sensitivity of those financing projections to changes in the underlying assumptions. Based on these assumptions, the documentation should explicitly specify the required contributions from the private sector to the financing of the programme ;

    There needs to be a comprehensive, transparent, and effective monitoring system of PSI during programme implementation. Furthermore, all programmes should be drawn up on the basis that official resources do not finance large or sustained capital outflows. Monitoring should include a disaggregated analysis of capital flows in order to target all potential sources of outflows and aim to provide a regular and accurate information to the Board about the net contribution of each category of private creditors to filling a country's financing gap. In cases where a contribution from official bilateral creditors (primarily the Paris Club) is needed, the IMF financing plan would need to provide for comparability between the contributions of official bilateral and private external creditors. Excluding the debt vis-à-vis the IFIs, which benefit from a preferred creditor status, there should be a priori no reason to treat official creditors differently from private creditors and, within these two different classes, among its various components ;

    - IMF programmes should provide greater clarity about the limits to IMF assistance, and hence the consequences of failing to secure the needed contribution from private creditors. There needs to be in IMF programmes transparent contingency planning, i.e. alternative methods of meeting a country's financing requirements if the expected private contribution does not materialise in sufficient quantities or on sustainable terms. Such consequences may entail curtailing the official financing to the country and/or additional adjustment measures or, when appropriate, the implementation of a standstill. When countries suspend payments but are seeking to work co-operatively and in good faith with their private creditors and are meeting other programme requirements, the IMF should be prepared to lend into arrears ;

    - As a rule, access limits under the Fund facilities should be adhered to. In extreme cases, involving in particular substantial risk of contagion, with systemic effects, the SRF should be the facility of first resort. In other extreme cases, where specific circumstances require financing for a longer period of time, exceptional access under the SBA or EFF might be considered. In any case, the need for access to exceptional IMF finance should be clearly demonstrated by IMF staff and this access must be linked to private sector involvement. The criteria, procedures, and terms for granting exceptional access need to be further clarified and strengthened in documentation provided to the Board.

Crisis prevention

9. The EU considers strong and effective crisis prevention as a top priority. It welcomes the establishment of the International Capital Markets Department to this purpose, which will complement the earlier establishment of the Capital Markets Consultative Group. The EU also calls on the Fund to make decisive progress on macro-prudential indicators and early warning systems.

10. The EU reaffirms its commitment to promote the implementation and surveillance of internationally agreed codes and standards. Their implementation is in the economic interest of all countries, in particular those which want to consolidate or achieve participation in global capital markets. Market and official incentives to encourage compliance with international codes and standards should continue to be developed and promoted, and market awareness of the significance of codes and standards should be reinforced accordingly. Technical assistance and support are also crucial to ensure that all countries can make progress toward full compliance in a manner that reflects their unique development, reform priorities and institutional characteristics. Significant progress has been made in producing assessments of countries' observance of international codes and standards. The EU welcomes the progress achieved so far, in particular the successful experience in preparing and publishing Reports on the Observance of Standards and Codes (ROSCs) and the decision to recognise the 48 recommendations of the Financial Action Task Force as the appropriate standard for combating money laundering and terrorism financing. IMF-led exercises such as ROSCs and Financial System Stability Assessments should remain the central tools for providing assessments of individual countries' compliance with codes and standards. The inclusion of this assessment as a standard component of the Fund's enhanced surveillance should continue and possibly in time be integrated into article IV reports.

11. The EU strongly supports efforts under way to improve transparency, governance, and accountability in the Fund, and, in this perspective, the recent operational establishment of the independent evaluation office (EVO). It welcomes the appointment of Mr. Montek Singh Ahluwalia to head the Evaluation Office. It calls on the EVO to launch quickly its work and looks forward to receiving regular reports at IMFC meetings.