Transcript

Transcript of a Press Briefing by Caroline Atkinson, Director, External Relations Department, International Monetary Fund

November 18, 2010

Webcast of the press conference

MS. ATKINSON: Good morning everybody and welcome to our biweekly press briefing. I'm Caroline Atkinson, the Director of the External Relations Department at the IMF. As usual this briefing is embargoed until 10:30 a.m. Washington time, 1530 GMT.

A couple of things before we turn to your questions online and in the room. The Managing Director, Dominique Strauss-Kahn, will be in Frankfurt tomorrow speaking at two different events, at the ECB Conference which I believe began today on approaches to monetary policy and lessons from the crisis, and at the European Banking Congress. He will be delivering a speech there. We will let you know when it is available on our website and I'm not sure yet whether we will have a version prepared for delivery. The week after next on December 2, the Managing Director will be in New Delhi meeting with officials and again giving a speech at a roundtable at the Federation of Indian Chambers of Commerce and Industry. The First Deputy Managing Director John Lipsky is going to be delivering a speech next week in New York on November 23 at the Economic Club, and then he will be going to Dubai to participate in the World Economic Forum Summit on the Global Agenda on 27 to 30 November.

I can turn now to your questions. As usual, if you could identify yourselves, your name and your organization.

QUESTIONER: Could you tell us more about the IMF team that is in Dublin today, how many people, their names and titles, if possible? Also how is their mission or mandate been defined by the IMF? Finally, if the IMF does loan money to Ireland, what sort of interest rate would be taking about? Would it be comparable to the rates being charged of Hungary and Latvia and what are those rates? Thank you.

MS. ATKINSON: Let me begin with the last question which is perhaps the simplest. First of all, we have not received a request for financial support so anything to do with that is hypothetical, but I can tell you that we have perfectly standard interest rates and charges. I don't have them off the top of my head but they are available and we can get back to you with that, and they are available on our website. On your other questions, you're right that there is an IMF team actually en route to Dublin now. The Mission Chief will be Ajai Chopra who has been the Acting Director of our European Department. We're waiting for the new director who will be taking up his duties at the of November. Aja is very experienced in the IMF and he's been working on European countries for a long time. He's been leading the Euro Area consultations and he has already landed in Dublin. But the rest of the team is arriving and they will be able to begin work tomorrow morning, Friday morning.

QUESTIONER: How big is the rest of the team?

MS. ATKINSON: I believe there are some banking team experts and regular country experts. I'm not completely sure of the numbers but I think it's around 10 or 12. The other person who will be there is Ashoka Mody who was the leader, the Mission Chief, for the Article IV consultations on the last two occasions so that you may be familiar with him. And the other team members who typically go to Ireland and then the particular banking sector experts as the focus of these consultations as we described on Tuesday and as the Europe Group described, the focus of the consultations is to look at whatever measures might be needed to support financial stability and protect against market risks in the light of the Irish government's 4-year budgetary plan.

QUESTIONER: How long will they stay in Dublin?

MS. ATKINSON: It just depends. We never say at the beginning of our missions how long teams will stay. It depends on how the technical discussions continue and so on.

QUESTIONER: Would these be the same people who went to Athens, Mr. Chopra and Mr. Komodi? Would they be the same people who handled the Greek crisis?

MS. ATKINSON: No.

QUESTIONER: They're not the same people?

MS. ATKINSON: They are not the same people, no. In fact, there is a team in Greece now, so those are the people. Yes, at the back?

QUESTIONER: Two things. One, can you explain what has happened since I guess a couple weeks ago when the IMF repeatedly said that it did not believe that Ireland needed any special assistance, that its budgetary proposals and actions were sufficient to meet their crisis situation? Secondly, Irish officials have indicated that any IMF funding wouldn't necessarily require conditionality because it would be meeting bank capital buffers rather than government loans. Is that accurate to say?

MS. ATKINSON: The second part of your question is hypothetical about what would we do if there were a request for financial support and so I'm not going to go there. I would refer you to other cases where we believe that it's important to have government ownership of policy measures, and as we have seen in Greece there has been important public ownership even though measures that the government is taking there have been quite difficult.

Turning to Ireland, you mention that the government has laid out a plan. The Europe Group has supported that plan of fiscal adjustment. It's obviously difficult but it recognizes that some fiscal adjustment is necessary to deal with the aftermath of the boom and the crisis and we expect that that plan will come to the budget whether it's early December or late November. The mission that is there now is looking at the situation in particular in the financial sector given the concerns about market risks.

QUESTIONER: To follow-up on the first question I asked. What happened in the interim between when the IMF said everything looks appropriate, their budget proposals, the consolidation efforts that IMF clearly had said repeatedly it did not believe that a special funding IMF assistance would be necessary, to where we are today where the IMF team is going to investigate whether or not a special assistance is necessary?

MS. ATKINSON: I'm pretty sure that what we said in the past was characterizing our analysis of the budget looking at the prospects for the economy and fiscal consolidation in the debt track and I have no reason to change that. You know as well as I do that what's happened in the meantime is that there have been some market pressures and in reaction to that the Irish government has been concerned and Euro partners as well about the best ways to reinforce financial stability in Ireland to lay the foundation for a strong recovery. We're usually pretty careful. I don't have the words of the press release in my mind now, but we're usually pretty careful not to make categorical statements that last forever. Obviously things can change, but right now we are having technical discussions or we plan to begin technical discussions tomorrow with the Irish authorities.

QUESTIONER: Would you say that the situation now is more a result of market pressures than it is fundamental underlying structural issues?

MS. ATKINSON: There's a mission in the field. I am not going to comment on how their analysis will evolve. We've commented already on the underlying situation, but for every country, policies evolve in reaction to the situation in which countries find themselves.

QUESTIONER: Just to quickly clarify something, is there a facility or an avenue for the IMF just to support a banking sector without going through the government?

MS. ATKINSON: Again that is a hypothetical question.

QUESTIONER: No, it's not a hypothetical.

MS. ATKINSON: Let me tell you the way the IMF deals with governments. We only lend money when governments make a request. We only consider making loans or disbursements when governments make a request. And our money is channeled through governments. It may be channeled to a variety of different purposes, but we couldn't decide to lend to an individual farmer or to you or to me.

QUESTIONER: That's all I wanted to establish, that it would have to go through the government. A question I had is what can you tell us about cross-exposure to the Irish banking sector elsewhere in the world? Have you looked at these sorts of systemic connections? Are there risks clustered in any other country, the U.K. or elsewhere that you have identified?

MS. ATKINSON: I don't have anything for you on that. I would point out that of course Ireland is very important. It is a relatively small part, I believe it's about 1 percent of Euro Area GDP, but of course it's important to maintain a watch on these sorts of situations as the Euro authorities and the IMF and indeed others are doing.

QUESTIONER: I have a few questions concerning. First of all, if the IMF has any reaction about the fact that the Argentinean government announced that it's going to negotiate with the Paris Club without the assistance of the IMF.

MS. ATKINSON: I understand and we understand that the Paris Club has indicated a willingness to have discussions with Argentina on repayment over a short period of time of their loans. That has been done in some other cases. Restructuring of debt with the Paris Club traditionally involves the IMF and an IMF program, but repayments of debts over a short period of time would be probably a good thing.

QUESTIONER: When you said a short period of time, we are talking about how long?

MS. ATKINSON: That's something for the Paris Club and Argentina to debate. It's not something for us to get involved in.

QUESTIONER: Do you in some way believe that this is a message from the country saying or reaffirming their refusal to allow the Article IV?

MS. ATKINSON: No, I don't think that. We have continuing relations with Argentina. We have a representative who's located in Buenos Aires. We continue to have discussions with the Argentine authorities also in the G-20. I think this is a separate issue where the Argentine authorities have expressed some interest and the Paris Club has expressed a willingness to discuss normalization of their relations with those creditors. So I would see it in that light.

QUESTIONER: Forty days ago at the closing of the Annual Meetings, the final document did a very strong call to all the members to fulfill the obligations concerning Article IV. In the region the only two countries that don't do that are Venezuela and Argentina. In this last 40 days did something happen or did something change between Argentina and the answering of this call or nothing at all?

MS. ATKINSON: No, I have nothing for you on that. As I say, we continue to have discussions with the Argentine authorities and you're right that we haven't had an Article IV consultation with them for quite a while now although we do continue to maintain relations. I have some questions online so I'll perhaps turn to a couple of those.

QUESTIONER: Sorry, the last one. Yesterday I saw some officials from the Argentinean government here at the IMF. They came from Argentina so I was wondering if maybe there is something new to tell us or some negotiations.

MS. ATKINSON: No. You're right that the Foreign Affairs Minister I believe it was was visiting officials here and this is also something that happens from time to time.

QUESTIONER: I think it's his first time here.

MS. ATKINSON: It may be his first time but it's not the first time that Argentine officials have been here so that this is part of what I characterized as our continuing discussions and continuing relations with Argentina. One of the questions online is about Sri Lanka and it's from Divan Daniel of Pali Newspapers who asks Sri Lanka is submitting its 2011 budget next Monday. How confident is the IMF that tangible, concrete fiscal reforms including tax reforms would be included? I would say that we have a program with Sri Lanka and there has been a review concluded recently or discussions recently and this budget will be an important signal of the authorities' willingness to continue with the fiscal reforms.

I should perhaps also explain that I have received quite a lot of particular questions on Ireland online. Some of them are asking, and I'll repeat one or two of the questions so that you understand what's coming in, they may be about our views on the government's budget plans, our views on various tax and spending measures, our views on Ireland's needs for financial support, and to clarify that I've said in answer to your questions all that there is to say now and to repeat that we're not in program discussions today. We're having technical discussions right now. And of course we'll be keeping you updated and we are also there with as you know the E.U. and the ECB so that it's three-party discussion with the Irish.

QUESTIONER: I want to ask you directly does the IMF have any concern about the Spanish financial situation that could lead us to a similar situation in Spain as in Ireland?

MS. ATKINSON: We have seen the Spanish government take strong measures both to address fiscal issues and on structural reforms and we expect those to continue and to support the Spanish economy and that's the kind of thing that helps to support against any threat of contagion. So I think that we feel that the Spanish government has been in control of the situation.

QUESTIONER: These market pressures, do you think Spain could be in a similar situation in a few days or in few weeks?

MS. ATKINSON: Every country is different and Spain's situation now is clearly different from that of Ireland and the particular problems in Ireland that the Irish authorities have spoken about their banking system and financial system is a different one from some of the challenges facing Spain which are also about dealing with unemployment and growth as well as market pressures.

I have a question online. Greece's 2011 budget tabled today aims to cut its budget gap to 7.4 percent of GDP. Do you have any comments on that? Will the measures already outlined by enough? Would the IMF consider revising the 2011 deficit goal is the country encountered major comments, and are there any first comments from the mission's visit to Athens? That's a complicated question. I have a fairly simple answer which is that there is a mission there on the ground. We do expect that there will be a concluding statement and a full press conference in Athens when the mission finishes which will be early next week, probably Monday. And all of these, you know, I don’t comment normally on discussions that are underway, so all of those issues will be addressed on Monday. Here and then here and then online. Yes?

QUESTIONER: Regarding Ireland again, will there be a full press conference in Ireland when the mission is completed? You mentioned one in Greece.

MS. ATKINSON: I don’t know. The mission in Greece is a negotiating mission that’s part of the program that was announced earlier this year, and I think it probably depends. In Ireland we will probably be taking some questions at the end of the mission. We will definitely not be doing that in the middle of the mission, and it will probably depend on how things develop on the ground. And we’ll, of course, keep you informed.

QUESTIONER: Irish officials have said that in these talks with the IMF in Dublin, they will be fighting, you know, to preserve not—they will be fighting any pressure exerted to make further cuts in budgets than the $15 billion that have already been foreseen. And there is sort of this image in Ireland of the IMF coming in and, you know, slashing spending and depriving people of basic needs and that sort of thing. Does—is there—would the IMF demand further cuts than those already envisioned? And sort of how does it feel to IMF officials to be seen as these cruel taskmasters, you know, coming in and whipping people who are already down? And then I have a second question—go ahead.

MS. ATKINSON: The IMF’s ultimate goal whenever we go to a country is to help to fix that country’s problems so that there can be a strong and sustainable recovery, so that there can be growth that can be maintained, and financial stability. And in particular, one of the things that we’ve learned and that we’ve focused I would say quite a bit more during this crisis is the importance of the ownership of a program by the government and the people, and that is important for a program’s success. One part of that is also to make sure that the most vulnerable and the poorest are protected. I mean, very often when the IMF comes into a country, it’s like a doctor. We get called in because the patient is sick. And we have some medicine, which is the liquidity and the funds that we can provide, but we also have to suggest some measures—whether it’s dieting if you’ve got a heart problem or anything else—that may sometimes be difficult for countries to implement. But what we are doing is smoothing that adjustment. We’re providing money so that countries don’t actually have to take such difficult measures as they would have to without the money. And increasingly, over the last couple of years we’ve been very focused on the need for what we’ve been calling “social conditionality” on the need to protect the very poorest and the most vulnerable when there are, as there often are, adjustments required in the government deficit. Typically we get invited to a country—I’m not talking about Ireland now—but if we take Greece, we were invited there because the country had fiscal difficulties and difficulties in paying their bills. So we will advise on that.

QUESTIONER: I also wanted to ask you the if the funds would come entirely from the EU rescue fund, but I’ve also read that it would be a mixture of IMF and EU funds if there is a bailout. Could you comment? Would it be a mixture of IMF and EU or solely EU? And just mechanically, how does it work? The EU gives the money and the IMF supervises its implementation? Who does what between the EU and the IMF?

MS. ATKINSON: On Ireland I just want to repeat that there has been no request for financial support. No request to the IMF and no request to the EU or the ECB. So I don’t want to answer that question in the context of Ireland. I can point you to some other programs, not just Greece in the eurozone, but also Hungary and some others where there has been joint funding between the IMF and the EU and the ECB. And the joint funding—and actually in the case of Iceland, you know, there were other bilaterals that were supporting the Icelandic program, some of the Nordic countries. And in general, we have worked very closely with the EU and the ECB on whatever agreement and measures there may be. And I’m happy to take you through more of those details if, you know, if that would be helpful. You know, we can speak later.

QUESTIONER: Is it on an ad hoc basis? Does it vary according to each country? There’s no sort of set formula for how it’s done?

MS. ATKINSON: No, there isn’t. We have normal procedures, but there are not set formulas. We deal with every country on case-by-case basis, but we have a framework which we have used and which we are using in countries, although not in Ireland right now.

QUESTIONER: I just wanted to go back and press you a little bit if I could. Given the emphasis over the last year or so on spillovers, cross-border connections, the early-warning exercises, all of those, I’ve got to assume that somebody’s been looking at the connections emanating out from Ireland over the last few weeks. Could you give us a sense of what sort of research has been done in that regard and what the risks are?

MS. ATKINSON: There is research going on all the time into all sorts of spillovers. You mentioned the early warnings. You mentioned the spillover reports, which we will be beginning. That was mentioned at the G-20 and at the IMF World Bank annual meetings. I don’t have anything for you on, you know, where we see risks now beyond what has been published, you know, already in our Global Financial Stability Report, for example. It’s a pretty detailed document that came out earlier this year in October. So, I don’t have more for you on that.

I’m going to come to Ian and Sandrine in a minute, but there’s also a few questions online. Speaking about the G-20 in South Korea, a U.N. official on November 16th criticized the IMF reform, saying that two-thirds of the shift to developing countries—that’s in quotas, quota shares—comes from developing countries. Is that the case, and what is the IMF’s response?

I’m not aware of that particular criticism because, of course, much of the commentary on the quota shift that was agreed in the IMF Board on November 5, much of the commentary has been rather positive. And that is because of the shift to emerging markets and developing countries of over 6 percent of quotas. And about 80 percent of that comes from advanced economies and a small number of oil-producing economies. So the vast bulk of the shift to emerging and dynamic countries comes from those groups that were over-represented, including many advanced countries, of course, but also some oil-producing countries, which are classified in developing countries. So I think that has led to that confusion. But of the overall number, I think 102 of the 187 member countries—no, 110 of the 187 maintained or increased their quota share, and of that 102 were emerging and developing countries. So I think it’s clear that there’s been a big shift, there will be a big shift, in voting share and quota share to emerging and developing countries as a result of that reform when it’s implemented.

I have another question. Has the IMF got concerns that recent market tensions will cause significant damage to financing conditions in Portugal and Spain? Does the IMF have funds to support Portugal and/or Spain if Ireland’s support is to proceed?

And just to say that all of those are hypothetical questions. You’d probably do better asking the market experts how they see tension spreading. What I do know is that we see the Portuguese government and the Spanish government have taken measures. The Portuguese government is, as I said, presenting, expected to present, its budget to Parliament next week. The Spanish government has also taken significant structural and fiscal measures and had a rather lower debt position to begin with.

QUESTIONER: You specifically said that the current mission in Ireland is a technical mission and not a program mission. Historically, can technical missions turn into program missions or would it require a separate mission that would then be identified as a program mission to negotiate a program?

MS. ATKINSON: So historically, what we require is a request for funds in order to begin negotiating. And we also require approval internally for such negotiations to begin. In terms of who travels where and everything, one can be more flexible.

QUESTIONER: So if there was a request during --

MS. ATKINSON: It’s a hypothetical, and you know I’m not going to go there.

QUESTIONER: No, no, no. I’m talking about historically, looking historically, have there been technical discussions that during a mission a request has been made which has then turned into a program discussion? I’m just trying to understand how the IMF procedurally, operationally, works historically.

MS. ATKINSON: Right. So procedurally, operationally, historically, even though I’ve been here a long time, I don’t have off the top of my head how missions have changed in the field. What I can tell you is that the first thing we need to do is to have a request for financial support and then we will have discussions. You know, internally we need to have some agreement about how that request would be met. We’re also able to act very quickly and very flexibly, and we’re always ready to do that.

QUESTIONER: I don’t have your point clear. I will let you know if I can only assume that the presence here of Mr. Timmerman is in some way a response to the request of the IMF to go ahead with Article IV?

MS. ATKINSON: I don’t think we can make such an assumption because, first of all it’s often dangerous to make assumptions, and secondly I believe that the situation with Argentina and the Article IV has been going on for some time now. There have been different meetings and discussions. So I think we’re, of course, ready, but I wouldn’t make any assumptions from any particular visit or set of discussions.

QUESTIONER: What are they talking about?

MS. ATKINSON: Well as I said, we often have discussions with Argentine officials. We have Resident Representative there. We have people that come here for the annual meeting. So, I would just characterize these discussions as in our normal interchange, and I don’t have anything more for you on that.

QUESTIONER: You say all countries are in a different situation, but, you know, as you saw the markets are just reacting all the same on all the potential problem countries. How close do you think we are to a debt crisis if nothing is done in Ireland? And the second question is, based on the size of Ireland, given the size of Greece and the size of the package to Greece, I mean, is help the same size as Greece conceivable or does it make sense for Ireland?

MS. ATKINSON: I’m not going to comment on what size of money might be available were we to receive a request for funds. I think part of your question was about if are we worried that somehow there could be a problem that couldn’t be dealt with. And I’d just like to emphasize that we’ve seen that the EU has been able to respond when risks arise, that’s happened already earlier this year. A number of the EU institutions and national authorities have been implementing measures on fiscal reform, on structural reforms, and on the establishment of special mechanisms which are in place. We have worked with them. We have ample resources. The Europeans have ample ability to act as and when needed. So, if that helps to answer a little bit about the overall thing.

There are two questions online. Both Hillary Clinton, Secretary of State here, and the U.K.’s William Hague, Foreign Minister, said on the 16th of November that they’re in talks about reducing national debt as an incentive for the southern Sudan’s succession referendum that’s scheduled early next year on January 9th. And are we involved in any talks? Can we play any role in reducing Sudan’s debt?” So I just want to acknowledge that we’ve got that question. I don’t have anything for you now, but we’ll follow up with you on that bilaterally.

There’s another question on a different topic here, which you may have noticed that we have put out a paper. It’s the routine paper about the valuation of the SDR, the Special Drawing Right basket, which is our unit of currency. And there’s a question about when and how we can say, “Why is the Renminbi not, the Chinese currency, not a part of that? And what is the standard of the—that the IMF has for including currencies in that basket?” And there are a couple of key criteria. One is that the currency should be much used by, you know, in international trade; and the other that there should be—that it should be freely usable. And so the Chinese Renminbi still has, you know, there’s still capital control so it’s not part of the SDR, but we do have that information online.

Okay, so I think I’ll take one more quick question there and there, but I’m already anticipating that my answers will be a bit repetitive.

QUESTIONER: Yes, I just wanted to clarify Strauss-Kahn’s speeches in Frankfort. Both of those are tomorrow, one at the ECB Conference and the other at the European Banking Congress. Will those speeches be released under embargo? And can you give us any idea of what he’s intending to speak about?

MS. ATKINSON: I have nothing for you on that. If it is released under embargo, we’ll certainly make sure that you know. One event’s in the morning, German time, and one in the afternoon.

QUESTIONER: One of the main issues for Ireland is will it be able to maintain its 12.5 percent corporate tax rate? There is a perception certainly that the EU is very keen for that tax break to come up, and there is a perception among experts that the IMF is a little bit more lenient because they understand that this tax rate is crucial to Ireland’s future growth. Could you comment on that? Is that true? Would the IMF be more understanding than the EU on that?

And the other question, some people are predicting now a crisis in the whole residential property market, the rates of foreclosures are going up, people being out on the street. You mentioned earlier that the IMF does care about the most disadvantaged in these crises and is trying to protect them. Is it possible that a part of any agreement with the Irish would include a government program to keep people in their homes?

MS. ATKINSON: I’m sorry, you’re getting way ahead of where we are, so I can’t offer you anything on any details of discussions that haven’t even begun yet.

QUESTIONER: Do you have a policy on corporate tax rates?

MS. ATKINSON: No, we don’t have a defined policy. I mean, every country is different, has different circumstances, similar to what we are.

QUESTIONER: I would like to know if the Spanish government needs to do more or to do different or faster than now in order to avoid the current market pressures?

MS. ATKINSON: We believe that the Spanish government has laid out a fairly ambitious plan and that that’s what needs to be implemented. The structural reforms are also important to provide over the medium term a reduction in unemployment and more job growth. So that’s all I have on Spain now.

Thank you all very much. Embargoed until 10:30 our time, 1530 GMT. Thank you.