Transcript

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

July 12, 2012

Webcast of the press briefing

MR. RICE: Good morning everyone, and welcome to this IMF press briefing. I am Gerry Rice of the External Relations Department. Welcome to our friends in the room and also online.

Before we get to your questions this morning, and as usual we will be under embargo until around 10:30 a.m., that's Washington time, let me cover a few events and upcoming publications and speeches and so on that may be of interest to you. Firstly, the update on our flagship publications, that's the World Economic Outlook, the Global Financial Stability Report and the Fiscal Monitor, will all be released this coming Monday, July 16, here in Washington. There will be a press conference here at the Fund's headquarters at 9:30 a.m. and the press conferences will be led by the respective directors for those publications well known to you, Olivier Blanchard, Jose Viñals and Carlo Cottarelli. We are aiming to get those documents to you under embargo on Sunday at 3:00 p.m. to give you sufficient time for coverage of those important documents. Secondly, let me mention that we are have a preliminary date of next Wednesday, July 18, for likely publication of our Staff Report on the 2012 Euro Area Article IV Consultation, and on Thursday, the following day, we have the preliminary date for the publication of the Article IV for the United Kingdom.

In terms of the Managing Director Christine Lagarde, she is speaking as we speak in Bangkok, Thailand, at the Bank of Thailand. That speech has already been sent to you, and if not already available on the website, it will be there very, very shortly. I invite you to read his important speech on Asia and the IMF's view, which comes at the conclusion as you may know of Madam Lagarde's visit to Asia where she has been in Japan, Indonesia and today finally in Thailand. She will be traveling next to London where on July 26 she will participate in the Global Investment Conference being held there. Finally, our Deputy Managing Director Minouche Shafik is in Vienna today and tomorrow attending a conference to celebrate the twentieth anniversary of the Joint Vienna Institute, our regional capacity-building and training center there. The conference is on Central, South and Southeastern Europe and is being webcast live from our website QUESTIONER: Gerry, good morning. Is the mission from Athens back, I mean Mr. Thomsen and the members of his team? When are they going back, if they are going back? If you can tell us because we are hearing different things, what are the fine things of the mission?

MR. RICE: To try and put your question in broader frame, the fact-finding mission has just concluded its work in Athens and is returning to headquarters as planned. In terms of the main findings, it is too early to get into details, but I think we can say that there are policy implementation delays in a number of areas and it is clear that the economy is going through another difficult period. Again, it is premature probably to get into too much detail, but clearly the important thing is to put the program fully back on track. We will not have a report at this stage. As you know, that always comes at the end of the review at the time of the Executive Board meetings, so that we are not there yet. You had asked when the mission would return, and we are expecting the mission will return on July 24 to commence discussions on how to bring the program fully back on track.

QUESTIONER: I want to follow-up. Greece announced publicly its intention for renegotiation. We want to hear from you the position of the IMF. Thank you.

MR. RICE: Michael, we have discussed this before here. I would repeat what has been I think our very consistent position on this. The basis for discussions continues to be the objectives of the program that have been agreed with the Greek government. On that basis, if there are ideas how to better achieve the key program objectives, we are open to discuss them, as is the case in any of the programs that we support.

QUESTIONER: This week the Spanish government approved a new austerity plan that is aligned with the Article IV that the IMF released previously. I would like you to comment on that and if you think additional measures will be necessary, because it seems that the markets are not responding to these measures with more confidence. Thank you.

MR. RICE: The measures announced by the Spanish government are difficult steps, but we believe steps in the right direction. We think that they should help Spain achieve the revised and the less-front-loaded deficit targets that were recommended by the Eurogroup, which we also welcome, as they imply more accommodation of the weak growth outlook. I think it is important to say that this less-front-loaded deficit path combined with the fiscal measures that have been announced should help Spain underpin the soundness of its public finances. Again I think it is important to bear in mind that that is the goal here, because that is the prerequisite for sustainable growth and employment gains in the medium term, which I think is the goal that we all share. As a reminder, the IMF does not have a program with Spain and the Spanish government has not requested financial support from Spain. But as you indicated, the steps taken are in line with the conclusions of our recent Article IV.

QUESTIONER: On Cyprus, after completing the fact-finding mission, could you give us any information about preliminary findings on how much money we need or what measures need to be taken? And when the next mission is going to be in Cyprus and what the goals of the second mission will be.

MR. RICE: The mission has just been in the field, it is premature to get into too many details, but let me try and give you what I have got. The fact-finding mission has as you say just returned from Cyprus and we are now processing and analyzing the information and the facts that have been gathered. At the same time, of course, discussions with our European partners and with the Cypriot authorities continue from headquarters. We will not have a report at this stage, which is normal because, again, the reports are only issued at the end of the review process and after the Board decisions. Next steps? The timetable for further engagement has not been decided, but we expect the mission to return in the next few weeks to follow-up on its work. We are not at the point where we can give numbers around possible financing needs that will come later in the process. Finally, I think you had also asked about the goals of the program. Again, it is premature to get into too many details until the discussions with the authorities have been concluded, but clearly one of the priorities will be measures to restore the health of the banking sector.

QUESTIONER: Good morning, Mr. Rice. In light of the seventh review of the Irish program, how significant does the IMF believe that the proposed restructuring of bank debt and taking it off the sovereign's books potentially would be for the sustainability of the sovereign in Ireland? The second question would be about the upcoming budget and the actions that the IMF needs or it says are needed? Then a third question would be about the IMF's view of the so-called Croke Park Deal, the labor deal between government and unions on public-sector pay?

MR. RICE: It is nice to have our Irish friends with us here. Welcome. As you know, the statement from the EC, the ECB, and the IMF on the most recent review was just issued today, so I might want to refer colleagues to that. I believe the authorities also had a press conference this morning. In terms of your specific questions, what I would say on the first one about the linkages between banks and the sovereign and so on, the Euro Area summit held just a few weeks ago recognize the imperative to break this what we've called vicious circle between the banks and the sovereigns that burdens the economic recovery in Ireland. In that context, the EC, the ECB, and the IMF are discussing with the Irish authorities technical solutions to improve the sustainability of Ireland's well-performing adjustment program. Turning to your question about the IMF's assessment of the budget, the budget is on track in the first half of the year and is expected to be within the annual target for 2012 of 8.6 percent of GDP. Fiscal measures of €3.5 billion have been agreed for 2013 and the Irish government has the lead on developing the specific budget measures to that effect. The next review mission in October will include a more detailed discussion of the 2013 budget. Your last question was about the Croke Park agreement. I would like to preface my response by pointing everyone to the press release, which has just come this morning. The reason I want to do that is there is a clear statement in this that Ireland's unemployment remains unacceptably high and generating growth and jobs on a sustainable basis remains a critical priority, and I am quoting from the statement here. Accordingly, the authorities are considering plans to utilize the enhanced European Investment Bank resources in a range of sectors including education, transport, and healthcare. The introduction of pilots to more actively engage with the unemployed under the Pathways to Work Program, which you are very familiar with, is encouraging. And strengthening the provision of activation services especially for the long-term unemployed is critical. Again, I think that is an important part of the statement that was issued today. To be specific with you then on the Croke Park agreement, what I would say is that it has delivered the budgeted wage bill savings and the Irish authorities continue to manage public-sector wages within the agreement.

QUESTIONER: Could I ask about discussions with Romania and also with Hungary?

In terms of the Romanians end of program and revision and in terms of what kinds of talks you have had with the Hungarians.

MR. RICE: On Romania, the status of the Standby Arrangement with the Fund has not changed as of now. I can tell you that the visit of the mission that will conduct the next review, the sixth review, has not been scheduled yet and once the dates are firm, we will communicate them as always in the past. On Hungary, that the mission will be on the ground starting Tuesday. I would not want to preempt that work by going much further, but clearly they are going to look at recent economic developments. So clearly the dialogue and the relationship is active.

QUESTIONER: The Greek government has already started to put red lines about the prior actions that have to follow before the Troika's visit to Athens. Is this an action that helps the negotiations between Greece and the Troika?

MR. RICE: I do not have a lot to add to the questions raised earlier on Greece. I think we have to just take this one step at a time, the fact-finding mission has been in Athens, we are assessing the information, and we will be going back July 24. The basis for the discussions remain the objectives of the program and I will not repeat what I said earlier, but I think it probably helps to respond to your question.

SPEAKER: An estimation as to when the Board of the IMF will make a decision?

MR. RICE: I do not have a date for you on that yet. There is a question online on Portugal is asking, "In Portugal prepared to admit a deficit this year above 4.5 percent or every slippage must be compensated with new measures? Could Portugal have one more year to meet the 3 percent deficit like Spain?" I think the most recent review confirmed that the Portugal program is making good progress and is on track amid continued strong external support, and Euro Area member states have declared they stand ready to support Portugal until market access is regained. On your specific question as to the deficit, the authorities are committed to meeting the fiscal target and we support that. The general government deficit target of 4.5 percent as you say for 2012 remains appropriate. Meeting that target will require rigorous implementation of the 2012 budget. I would add that downside risks to this target have increased, but on the information available to us to date, we still think it can be reached. Of course, if there are much stronger cyclical headwinds from Europe, one has to keep an open mind.

There is one more question on the Dominican Republic, "When will the IMF mission come to the Dominican Republic? Where do we stand on negotiations?" I can say that staff and the authorities maintain a close dialogue in preparation for the post-program monitoring and Article IV discussions, and the dates for a possible mission are still to be determined.

QUESTION: I would like to follow-up on my Greek colleague's questions. When you say and you've been saying for a while that the objectives remain the same for the program, it sounds a little bit like a central bank coded message. You also said that there has been slippage in implementation of the program. Very precisely, is the IMF open to changing or moving the deficit targets a bit further for Greece? A second question regarding Hungary. Are we still speaking of a standby arrangement and not of any precautionary flexible credit line, or anything of that nature?

MR. RICE: On Greece, I really don't have a great deal more to say beyond as you say the program objectives remain the basis for the discussions. As I was saying earlier, it's premature to get into which of the different measures might be open to discussions. What I can say is that what we know so far, some targets were met, a number were missed, and in some cases we don't have the data to access. So we'll have to wait a little longer to develop the full picture. As I said, the timeline is that the mission will be going back on July 24 and we will take it from there. What I can say to you on Hungary is the authorities have indicated that they will treat the SBA as precautionary, and I don't have much else beyond that on Hungary.

QUESTION: The negotiations are for an SBA? It's not an FCL or a PLL?

MR. RICE: That's right.

QUESTION: On the next Cyprus mission it was expected to be on Monday. According to new information, it was pushed for July 22. Could you give us an explanation? Does this have to do with more time necessary to make the assessment? Maybe it has to do with the Russian loans or the Chinese loans? What is your position on these loans? Has it changed since the last time you talked to us?

MR. RICE: I don't believe we had ever given dates on the next mission. Again, this is a pretty much normal process, the fact-finding mission went out, they come back, they assess, they distill information, and then they will be going back I think as I said earlier in the next few weeks to follow-up on the work. What I can say on third-party financing is that this is really a matter for the authorities and bilateral lenders to discuss and decide. It's not really an issue for the IMF.

QUESTION: Going back to the intention by the Greek government for renegotiation, Madam Lagarde said that she is not in a mood for negotiation or renegotiation. Gerry, can you clarify this statement? Can you tell us what she means?

MR. RICE: I don't think there is any inconsistency, with what we've been saying repeatedly which is what I've repeated this morning, that we're not in the position of negotiating the program objectives. They remain the basis for the discussion. But if there are ideas how to better achieve those objectives, we are open to that as we are in the case of any other program. Again I don't really see any inconsistency there.

I have one final question online, "What is the IMF's response to NGOs' request that the IMF insist on an audit of the over 40 billion in oil revenue unaccounted for from 2007 to 2011?” There I'd like to say that of course the IMF attaches great importance to transparency and good governance in the management of public finances in all member countries. Fund's staff and Angolan authorities have devoted significant efforts to analyzing the inconsistencies and weaknesses in Angola's fiscal accounts and the factors causing large discrepancies observed in these accounts since 2007. While this work is not complete yet, it has already produced important results in terms of highlighting the key factors underlying these discrepancies and promoting the introduction of institutional mechanisms addressing these factors and enabling better control and accountability for Angola's oil revenue and improved coverage of the fiscal accounts. The Angolan authorities have indicated that they intend to complete this work and have adopted measures to address the underlying problems. I can say further on Angola that the Board concluded yesterday the 2012 Article IV consultation with Angola and the first post-program monitoring review and there will be more information on that discussion. A Public Information Notice, will shortly be posted on our website and we expect the staff report to be published in the very near future. I hope that that helps in Angola. I'm going to wrap it up in the room and say thanks very much to you all for being here and to our friends online. We will see you in 2 weeks' time for the next press briefing and that will be the last one for a little summer break until we come back at the end of August.