Transcript

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

May 9, 2013

Webcast of the press briefing

MR. RICE: Good morning, everyone. And welcome to this press briefing on behalf of the IMF. I'm Gerry Rice, Director of the Communications Department.

As usual, this press briefing will be embargoed until 10:30 a.m., Washington time. Also, as usual, let me begin with a few announcements, and then turn to your questions in the room, and online, as well.

So, in terms of management, IMF management travel, the Managing Director, Christine Lagarde, is speaking today at the Global Investment Conference. That's in London, and that's going to be, actually, very shortly, within the next couple of hours. And that is open to the media, that event.

The Managing Director and the First Deputy Managing Direct, David Lipton, will then be attending the G-7 Ministerial Meeting, that's tomorrow and Saturday, being held outside London. The First Deputy Managing Director, Mr. Lipton, will then be in Switzerland for the Bank of International Settlements meeting in Basel, on May 12 and 13.

On May 20, our Deputy Managing Director, Min Zhu, will be in Bishkek for launching of the Caucasus and Central Asia Economic Outlook update. He will then attend the Middle East World Economic Forum in Jordan, from May the 23rd to the 26th.

A couple of other events that may be of interest to you -- on Friday, May the 17th, our Research Department, Monitoring Capital Markets Department, and the European Departments will hold a conference on "Financial Structure: The Issues." And this conference will take stock of some key financial sector issues, including shadow banking, cross-border banking, and so on. This is open, and the agenda is available now on our website.

Finally, on May the 21st, our Middle East Regional Economic Outlook update will be presented by our director for that region, Masood Ahmed in Dubai. And you may have noticed in recent weeks, the launch of our other Regional Economic Outlooks on Africa, Asia, Latin America, and so on. They've all been published now.

Finally, then, just in the past few hours, a joint statement from the European Central Bank, the European Commission, and the IMF has been issued concerning the 10th Review in Ireland. And I would refer you to that as a point of information.

Okay. With that, let me turn to the room.

QUESTIONER: I wanted to see if you could speak a bit more about Egypt. The government is having some reshuffling in the cabinet there.

So, I was wondering if you could give some updates, if you have any more thoughts about when the next mission will go, and what are the remaining issues that must be discussed on that.

MR. RICE: So, just stepping back a little bit, two weeks ago, at the time of the Spring Meetings, the Managing Director and the Egyptian authorities declared, in a joint statement -- that was published -- that further progress had been made in their discussions at that time in Washington, and that work would continue in the coming weeks, with the objective of reaching agreement on an IMF standby arrangement to support the Egyptian authorities' national economic program.

In terms of the status, at this stage we are awaiting updated economic data and reform plans from the authorities, and we are working jointly to ensure that the package will successfully address the rising fiscal and balance-of-payments imbalances, and enable an economic recovery and transition to sustained and socially balanced growth.

On your specific question as to the timing of the next mission, at this stage we have not discussed nor scheduled a new mission. Staff is working actively with the Egyptian authorities, from headquarters, building on the work advanced in the field during the April mission.

QUESTIONER: If I may just follow up on Egypt -- you said you're awaiting updated information. Does that mean you're building on the same structure that -- of agreements, of talks that have already taken place? Or that there are new ways in which the IMF and Egypt are seeking to meet your sustainable debt discussions?

MR. RICE: Well, as you know, the economic conditions in Egypt have been evolving -- so, obviously, the discussions have to take account of that.

I don't have details on the technical aspects of the discussions, but just to say that, in terms of building on, you know, what's been discussed before, we stand ready to support a home-grown program that addresses the economic and financial challenges that Egypt is facing, that is socially balanced, and has broad ownership so that it can restore confidence and be implemented successfully.

QUESTIONER: And, if I just may follow up on one more thing -- since there's no mission scheduled, should we read from that that there's not enough consensus in Egypt between -- the broad consensus that you're seeking politically and the IMF for a concluding team to go there and iron out the final details? Does this mean the program -- the fact there is no mission scheduled for Cairo, mean that the agreement continues to be in limbo?

MR. RICE: No, I would not read that into it. I would merely interpret this as the discussions' continuing in light of evolving economic conditions, as I just said -- that we remain actively engaged, and the discussions are progressing in that context.

QUESTIONER: Gerry, can you give us a timetable for Greece and Cyprus, when the Board is going to decide for the 3rd Review on Greece? And also if you can tell us the Board date on Cyprus, and what we can expect from the Board -- if you can tell us?

MR. RICE: On Greece, as you know, the Staff Level Agreement on the 3rd Review was reached on April 15. There was a statement published at that time. There has been progress in resolving the few remaining technical issues, and in completing the prior actions that needed to be in place before the review could be concluded.

And, responding specifically to your question, the Board is expected to meet on May the 31st to discuss the completion of the 3rd Review. In terms of expectations, contingent on Board approval, we would expect the next disbursement to take place shortly after that May 31 meeting.

Turning to Cyprus -- again, just stepping back a little bit, as you know the teams of the IMF and our European partners reached a Staff Level Agreement with the Cypriot authorities on April 3rd. A statement published at that time. The Executive Board is expected to meet on May the 15th to discuss the request for the program. Again, contingent on Board approval, we would expect the [first] disbursement to take place shortly after that Board meeting.

QUESTIONER: Also, I wanted to ask about the last paragraph of the Concluding Statement of the IMF mission to Greece. I'm talking, there, about the one, the paragraph about the debt of Greece. It seems to me that the IMF is asking for OSI. And my question, Gerry, is this: Do you think that Greece needs a new haircut?

MR. RICE: I'd like to emphasize here, we do not envision any new OSI discussions at this juncture.

What we have said before is that our projections show that further debt relief will be needed for Europe to meet its commitment to reduce Greek debt significantly, to a sustainable level -- and, remember, that was 124 percent by 2020, and to substantially below 110 percent by 2022. Again, none of this is new. It's all part of the record.

Greece's European partners have said that they will provide additional debt relief if Greece meets its fiscal targets. They have said also that they expect to review the country's case by the end of this year. They have not specified how the debt relief would be provided, if needed, but there are various options, including more generous terms on loans, or outright transfers.

But, again, I want to emphasize: This is not new. And the statement in the Article IV Concluding Statement that you referenced, Michael, is not new in that respect.

I will come back to the room, but let me take a couple of questions online, before they slip out of sight.

One is fasking: "How does the IMF see the plan outlined by Italian Prime Minister Letta toward a lowering of the austerity measures, for example, the proposal to eliminate the property tax in favor of more growth-oriented measures?"

Let me take that, and then I'll take one more, come back in the room.

On that question on Italy, the government has indicated that it will stick to its fiscal commitments to the European Union. The IMF's view has been that fiscal policy should continue to target a structural balance which takes into account economic conditions. At the same time, fiscal adjustment should be made more growth-friendly by rebalancing the composition toward expenditure cuts and lower taxes.

On which taxes to lower -- which is part of the question -- I think I'd only want to say that, first and foremost, any tax reforms should be part of a comprehensive strategy to make the tax system more efficient and fair.

Let me take one other question online: "Mr. Asmussen from the ECB said Wednesday that the IMF shouldn't take part in any future bailout program in the euro zone. Do you share that opinion? And does it mean that the troika model is not relevant anymore?"

On the question, what I'd like to say is, we have enjoyed excellent cooperation with the European Commission and the European Central Bank. It's important, obviously, to note that the challenges facing the euro zone are extremely difficult, with no easy or quick solutions.

While we cooperate closely with our European counterparts, our Executive Board, representing all the IMF's member countries, oversees our actions, and ultimately takes independent decisions. The European Commission and the European Central Bank are similarly accountable to their stakeholders. So I say that by way of context.

And specifically on the question, I understand from reports that Mr. Asmussen underscored that he would not advise to change the troika system right now.

QUESTIONER: Do you know anything about whether euro zone finance ministers are planning to make a political decision to provide two packages of rescue funding to Greece?

MR. RICE: I don't have anything on that. No, I haven't heard about it at all.

QUESTIONER: Pakistan is headed for elections later this weekend, and it's also in a big economic mess. Their delegation had come here last month for talks.

Can you give us an update and a timeline, how the IMF plans to move with Pakistan's economic crisis immediately after the elections of the new government is formed after this month.

MR. RICE: Yes. You're right, the authorities met with the Fund during the Spring Meetings a few weeks ago. And the discussions there centered around the difficult economic challenges facing Pakistan, and our urging of the authorities to begin taking the necessary actions to help stabilize the economy and lay the groundwork for future growth.

As you say, elections are schedule soon now. We remain closely engaged. And a staff team is planning to visit Islamabad in late June to continue the policy discussions on mitigating economic vulnerabilities in Pakistan.

QUESTIONER: There are some news reports that IMF had offered 5 billion of aid to Pakistan when the delegation was here.

Can you confirm those? And if there are any conditions attached with those?

MR. RICE: There has been no formal request for a program from the Pakistan authorities.

QUESTIONER: On the fiscal issue, recently there was a heated discussion, and even critique on the research of two economists, (inaudible), on the so-called "90 percent redline" of debt-to-GDP. What's the IMF's take on this?

And is it fair to say the Spring Meetings a couple of weeks ago is the turning point for the IMF itself on the fiscal issue: Now the IMF is moving towards less immediate effort on fiscal consolidation, and more efforts on immediate efforts on supporting growth?

MR. RICE: What we have said is that, with growth and employment remaining weak in many countries -- again, what we have said is getting the pace of fiscal consolidation right is of the essence. Countries where market constraints are material need to sustain consolidation efforts, but the adjustment elsewhere should be conducted at an underlying pace that balances the need to bring down deficits and support growth.

We have said, also -- not new -- that it's important to focus on fiscal targets, focus the fiscal targets on structural measures rather than the nominal deficits. We have also, I think, said fairly consistently that it's important that there be not just the right pace of fiscal policies, but the right mix of policies overall -- and that means the complementarities between fiscal, monetary, and structural. So, you know, it's not just reliance on any one aspect.

So, it's the right pace and the right mix of policies, is what we have said.

QUESTIONER: If I could just follow up on that. This "right mix of policies," and reaching the right balance, is one of the things you told the U.K. during the Spring Meetings, the WEO News Conference, and now, probably, the Article IV visit. Now, when the U.K. says they have QE, they have automatic stabilizers, they have things that sort of compensate their austerity policies, then is there ground for you to say to ease their deficit-cutting pace?

MR. RICE: On the U.K., as you may know, the Article IV mission has just begun. And, as you know, we don't comment on discussions that may take place in the context of the Article IV mission. The team needs to get on with its work in consultation with the authorities. This normally takes about two weeks. We'll be issuing a Concluding Statement at the end of that mission.

QUESTIONER: Yes, but you made a lot of comments before the Article IV visit. Mr. Blanchard and Mrs. Lagarde made comments. So why is it not appropriate to comment, in general, outside of the Article IV?

MR. RICE: Well, this is our standard practice when the Article IV is underway, as I think you know. So, I won't say much beyond what I've just said.

QUESTIONERIs there any specific plan, any new proposal, to accomplish Greece the goals that you have mentioned on the most recent report? Like tax evasion, high prices, and the restructuring of the public sector?

MR. RICE: You know, on that question, I would really refer you, and other colleagues, to that Concluding Statement, which was issued just a few weeks ago, on the Article IV. And I think it really -- it's a fairly -- I'm just looking at it -- it's a fairly detailed statement, and I think it lays out what the Fund's views are on the issues you just mentioned.

But did you have something more specific than that?

QUESTIONER: No. How they will deal with this? Any new proposal to deal with these things?

MR. RICE: Well, again, I would just refer to the policy measures and actions that are laid out in a fairly detailed way in this Concluding Statement.

Now, in terms of further information, further detail, obviously, the Article IV Staff Report goes to the Board for discussion and, after that, as is our normal procedure, the entire report will be published, so there will be a bit more detail at that time.

QUESTIONER: Is there any particular message that the Managing Director hopes to deliver, or to impress upon the G-7 members?

MR. RICE: I wouldn't want to preempt the meeting that's going to happen tomorrow, Ian. I just think it's very important that the major economies get together, obviously.

There have been indications of what some of the big issues on the agenda are going to be: where we are in the global economy, the growth issue, the jobs issue, the financial sector reform.

A couple of weeks ago, at the Spring Meetings, I think there was a broad consensus coming out of those meetings that there's still a sense of urgency around where we are in the global economy. We have an uneven recovery. Madame Lagarde had said at that time that what we need is not this uneven recovery that's taking place -- what she termed, we need a "full-speed recovery that's balanced, that's sustainable, that's inclusive." So, I would imagine that would be, you know, a big part of the discussions in London.

QUESTIONER: I was wondering if you could speak a bit about Slovenia? The government proposed a new draft reform package -- or is about to do that. And the central bank head of the country criticized it as reviving too much on tax hikes, and not enough spending cuts.

So, I was wondering if you could comment, whether you think this is enough to get the country's finances in order.

MR. RICE: The Slovenian government has begun pursuing an ambitious agenda for fiscal consolidation, restructuring the financial sector, privatization, and reforms in the pension and labor market areas. It's important that the government follows through on these, in order to build confidence and resume growth.

Clearly, the economy remains in deep recession, reflecting a severe credit crunch and widespread corporate insolvency. Addressing these structural constraints is essential for a durable recovery. And re-capitalizing the three largest banks, and cleaning up their balance sheets, is a priority.

Let me go online again, and pick up a question that is coming up there on Portugal: "What will happen next to Portugal, after its bond issuance."

Obviously, that successful bond issuance is an important step towards regaining complete market access for Portugal. But, in terms of what happens next, a joint IMF-EU-ECB mission is currently in Lisbon for the 7th Review of the program. It will assess, in light of the commitments under the program, the measures that were recently announced by the government to complement the medium-term fiscal strategy, as well as those aimed at replacing the measures that were rejected previously by the Constitutional Court. So that's the next steps.

QUESTIONER: how do you see the recent statements by Germany on the banking union? It seems that the Germans now support the banking union. And it seems to me that they follow your steps on this issue.

MR. RICE: Yes, well, I think it's encouraging. What we have said is that, moving forward -- and we've said this consistently -- moving forward on the banking union agenda is essential to address the financial market fragmentation in the euro area, and a single-resolution mechanism is a critical element of this agenda. In this context, we look forward to the European Commission proposal on the single-resolution mechanism by the summer, as indicated in the recent European Union Council decisions.

Another question online: "On Yemen, is it true the IMF is urging an end to the oil subsidy?"

I don't have a specific response on Yemen, but what I would refer you to our broader policy paper, issued a number of weeks ago, on energy subsidies, which I think lays out the IMF's broad position on those issues. But, again, I don't have with me, right here, the details on Yemen. But perhaps the media relations team can follow up with Matthew after this press conference.

QUESTIONER: May I ask one other question?

MR. RICE: Last question to you.

QUESTIONER: Yes. Gerry, the Cypriots have this feeling that the troika, and the IMF, is penalizing them, is penalizing the people for the mistakes of the politicians and the bankers. Do you have any comment on this?

MR. RICE: I think the IMF and the European partners are working together to help support Cyprus, in much the same way as they've been trying to support a number of other countries in the euro zone -- and that is to help the country overcome the very difficult challenges that they face, in the most effective way possible. So, it's about helping Cyprus to overcome this economic challenge that has been there for some time, and to help Cyprus get back on the path of sustainability, growth, jobs, and, ultimately, for the benefit of the Cypriot people. So that's the objective. That's the intention.

Okay, with that, thank you very much for coming. And I look forward to seeing you in a couple of weeks' time.