Transcript

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

June 20, 2013

Webcast of the press briefing

MR. RICE: Good morning, everyone, and welcome to this press briefing on behalf of the International Monetary Fund. My name’s Gerry Rice. I’m the Communications Director here at the IMF. As usual this briefing will be embargoed until 10:30 a.m. Washington time. Let me begin with a few announcements on travel and events, and then we’ll get to your questions in the room and online.

So beginning with the Managing Director, Christine Lagarde, and her travel, from July 5 until July 7, Madame Lagarde will be participating in the Annual Economic Forum in Aix-en-Provence in France. She’ll be making a speech there and participating in one of the panel discussions there.

On July 8, she will participate in the Euro Group Meeting in Brussels to present the concluding statement on the Euro Area Article IV Consultation. We’ll have a bit more details for you on that in due course.

Turning to the First Deputy Managing Director, David Lipton, is in Russia attending the St. Petersburg International Economic Forum, which opened today. He will be participating in a panel discussion on the G-20 agenda and global growth.

Later this month on June 30, our Deputy Managing Director, Min Zhu, is traveling to Heidelberg, Germany, to attend the Tidewater Conference, and then on July 2 to Geneva to participate in the ECOSOC meeting -- that’s the U.N. Economic and Social Council.

Allow me just to say, to bring to your attention, the announcement we made yesterday on our plans for e-learning and our collaboration with edX, the nonprofit founded by Harvard University and the Massachusetts Institute of Technology, MIT. I mention it because we’re quite excited about this initiative, and we look forward to updating you as it progresses, particularly when we launch fairly significant online courses next year.

One other reminder, and that is that we will have our update on the World Economic Outlook with our Economic Counselor, Olivier Blanchard, and that will be on Tuesday, July 9, at 9:30 a.m. And, of course, we’ll be providing you with all the details on that.

And then finally our next briefing will not be in two weeks’ time because two weeks’ time is July 4, which is a holiday in the United States. So we will see you again on July 11.

With that let me turn to your questions.

QUESTIONER: Thank you. Yesterday, Federal Reserve Chairman Ben Bernanke announced that if U.S. economy continues to improve, the fed considers tapering down the QE3 and to ending it by mid 2014. Do you have a comment on that, any policy suggestion for Fed on smoothly unwinding monetary accommodation? Thank you.

MR. RICE: Thank you for those questions. I would refer you to our concluding statement on the Article IV Consultation with the United States, which we issued just late last week where we said that the microeconomic benefits of asset purchases continue to outweigh the costs and the Fed should continue its preparations for a gradual and smooth exit. The highly accommodative monetary policy has provided important support to the United States and to global economic recovery. And under our staff growth projections in that Article IV a continuation of large-scale purchases through at least end 2013 is warranted.

On your second question about policy tools, I want to again refer to our Article IV Consultation last week. Obviously, the Fed has a range of tools to manage the exit from its highly accommodative policy stance. And in our Article IV concluding statement, we highlighted in particular the importance of effective communication and careful calibration of timing to avoid disruptions for the United States and for other countries.

QUESTIONER: If I may follow up, in releasing the concluding statement, the IMF lowered the prospect for the U.S. economy next year. Do you think it’s too early for the Fed to end QE3 by the middle of next year?

MR. RICE: Again, I’m just going to reiterate what I said earlier. We made our views known in the Article IV and they’re pretty clear and that was just a few days ago.

QUESTIONER: As you know the Prime Minister of Greece closed down the Greek state TV. First I wanted to ask you if the IMF or the Troika put pressure to the Prime Minister to close down the state TV. And second, because many people believe that it’s a violation of the freedom of the press, what is the IMF’s position on the closing of the state Greek TV?

MR. RICE: On that issue I would say that the recent decisions regarding the state broadcaster have been the government’s. The authorities’ economic program is supported by IMF lending and that includes a reform of public administration as you know, but does not make specific recommendations on decisions involving state companies. So the IMF identifies a country’s fiscal envelope and the related fiscal targets, but it doesn’t determine how those are achieved. And that’s true in Greece and true in the countries where we work.

QUESTIONER: May I follow up on this? Do you think that Greece chose the right way to do the first layoffs in the public sector reforms without causing political instability?

MR. RICE: You know, I just repeat that this is a prerogative of the government, so I’m not going to comment further on the implementation of that.

QUESTIONER: But do you worry about the political instability in Greece?

MR. RICE: Well, maybe just stepping back, from that question. As you know a mission has recently been in Greece, the mission of the so-called Troika -- the European Commission, the European Central Bank, and the IMF -- and they have been reviewing the government’s economic program. We believe that important progress has been made. To allow completion of technical work, policy discussions will pause, but are expected to resume by the end of the month. So that’s the status of where we are with Greece.

QUESTIONER: These technical issues, that sounds very vague. Now in the past that’s been because there’s been a failure to agree on the way forward. Is that the case this time, and could you give us more details what those problems are?

MR. RICE: You know we’ve paused the mission, so in that sense we’re still in the mission. And as you probably know, we don’t discuss details of discussions during the missions. I would reiterate that important progress has been made and discussions then are continuing and will continue on technical work. And we expect that to happen fairly soon, by the end of this month.

QUESTIONER: On this issue, wasn’t Greece ready to give answers to your questions?

MR. RICE: You know I’m sounding repetitive here, but there’s a number of technical issues that clearly are still being discussed, and we’re going to resume that discussion at the end of the month. But, again, we’ve said that important progress has been made already.

QUESTIONER: Do you think that this -- MR. RICE: I’ll come back to you, but let me move on.

QUESTIONER: Well, I have Greece and Cyprus, so let’s stay in the region.

MR. RICE: So we’re not moving on.

MS. RASTELLO: No, we’re just staying in the neighborhood. But just -- I mean this is technical, but as we know the privatization plans didn’t go as planned, let’s say again. So isn’t that more than a technical hurdle? How did you make up for that? That’s one of the criteria; if they’re not met, that could blow the whole disbursement.

And my question on Cyprus is as we’ve seen in this letter that the government and the EU sent to the IMF. Could you tell us whether that changes anything to the program? Are you going to discuss? Or how is the next disbursement looking?

MR. RICE: I don’t have much to add on Greece, but let’s not get ahead of ourselves. And, you know, let’s have the discussions continue toward the end of the month. And then we will be in a better position to give you more of a detailed assessment.

Turning to your question on Cyprus, yes, we have received the letter to which you refer. We do plan to respond, but as you would understand, I’m not going to get into the nature or the content or the timing of that response. More broadly on Cyprus, I would note that the government spokesman yesterday reiterated the authorities’ commitment to the Memorandum of Understanding.

QUESTIONER: I have to move back to that topic of the quantitative easing because in yesterday’s press conference, Chairman Ben Bernanke has also for the very first time given his definition of the substantial change of unemployment rate, which is 7 percent. So does the IMF research show the same understanding of that, which is 7 percent is like substantial change of the unemployment in the United States?

And also the IMF has said that it has a long way to go for the United States to taper its quantitative easing. So do you have a relatively clear timetable for that long way, how long would that have to go? Thanks.

MR. RICE: You know I wouldn’t parse what Chairman Bernanke said yesterday. And I think in terms of the Fund’s position, it was just a few days ago that we issued a very detailed concluding statement on the U.S. Article IV, which covered these issues. So I want to refer you to that since it was so recent.

QUESTIONER: Let’s have a go at Ireland. The bailout package comes to an end at the end of the year. What’s your view on them keeping a backstop credit, a proportional credit line in place for the future?

MR. RICE: You know we just issued -- I think it was yesterday -- a press statement on Ireland -- perhaps the day before yesterday. I’m just going to refer you to that in terms of our current position on Ireland.

QUESTIONER: I just have a quick question about Italy. Apart from your forecasts in April about the weak prospect of a return to growth in 2014 for Italy and the efforts that are current to approve measures to kick start growth again, what is your perception of what’s going on in Italy at the moment?

MR. RICE: We have an Article IV, annual consultation, that we do and is actually beginning this Friday. And it will last about a couple of weeks, and then we will issue a press statement, concluding statement, with some update on our views.

But on your question, we do welcome the package that was announced last week by the authorities, in particular the measures to support investment and streamline the judicial system. And we support the government’s intention of adhering to its fiscal commitments with the EU. And as we said in the past here, the structural reform agenda is also very important for Italy going forward. So there will be an update on our assessment coming very soon, and our Article IV mission begins tomorrow.

QUESTIONER: Thank you.

MR. RICE: Let me go online for a minute. There’s a question from Pakistan, asking “can we say what is the possibility of a new IMF program for Pakistan?” On that I can say that a mission began in Islamabad yesterday again to begin this annual Article IV consultation, discussions with the authorities lasting about two weeks, which is the normal. And we will issue a statement at the end of that. On the program, there has been no formal request for a program at this point.

Let me take another question online, and that is on Romania. “Could the delay in the privatization of Marfa, which is the freight railway company, lead to the cancellation of IMF Managing Director Christine Lagarde’s visit to Romania scheduled for July?” On that I would say those are two very separate issues. There’s the program review, which is ongoing in Romania. There are a number of issues being discussed and that’s very separate from the planned visit of Christine Large to Romania, which, indeed, should take place somewhere in mid-July, and we’ll get back to you with more specifics on that.

I have another question on the whole issue of monetary policy. “What does the IMF recommends to the emerging markets to attenuate the effects of a possible reverse in credit flows with the tapering of QE3 in the United States?” Obviously, this is an issue we are watching closely. Policy responses in emerging markets will need to be country specific. As a general rule, countries with macroeconomic policies, deeper domestic financial markets, and institutional investor base, and stronger micro- and macro-prudential policies, they will be better positioned to withstand any potential turbulence. Generally, the appropriate policy will be to allow markets to adjust to the rise in U.S. rates and risk premiums. Depending on the extent of outflows and liquidity pressures in market segments, some countries may need to focus on ensuring orderly market functioning using their policy buffers wisely.

More broadly this episode of financial turmoil provides a reminder for emerging markets of the need to rebuild policy space and reduce vulnerabilities as financial conditions normalize. This will help position them to effectively withstand future market turbulence.

And then just going back to our previous discussion, the U.S. Federal Reserve can also help to mitigate the impact through, as we’ve said, clear communication on its exit strategy.

QUESTIONER: Gerry, some European officials, including the Finance Minister of Germany, Mr. Schäuble, are saying -- and I quote -- “that the IMF should not be engaged long term in Europe as part of the Troika.” What is your answer?

MR. RICE: Let me just step back and briefly remind you, remind us all, of the way the Fund engagement and financial assistance works generally. The Fund is asked by our member countries in economic difficulties for help. Part of how we do that is by providing short-term financial assistance, usually up to three years, to help mitigate the worst and to create room for the authorities to tackle the key problems underlying the difficulties or the crisis that they’re facing. So, again, the goal is obvious. To help our member country get onto the path of recovery and growth. So that’s generally on the IMF and our engagement.

Specifically on the euro area, again our partner countries in Europe requested the support of the IMF, which led to the creation of the Troika mechanism, which you mentioned. And as we have said many times, this was a new format for the Fund as well as for our European partners, but we have worked well together, and we continue to cooperate closely. And, of course, for our part, we stand ready and will continue to stand ready to assist all of our member countries as best we can.

QUESTIONER: Yesterday, suggestions regarding the capitalization of the banks were made. Do you think that this suggestion is a positive answer from Europe towards the IMF concerns regarding the progress of the Greek program when, in fact, you think that a new haircut is necessary?

MR. RICE: We haven’t seen those remarks, so I won’t comment on those.

QUESTIONER: They’re going to discuss today, I think.

MR. RICE: Okay, I haven’t seen them so I can’t comment. We have commented I think for the last three press briefings consecutively on the whole issue of debt sustainability and Greece. There are no discussions right now, no new debt discussions, taking place, and I’ve said that consistently here.

QUESTIONER: Gerry, just a quick question on Egypt in case there was any update on the situation there.

MR. RICE: Okay. I don’t have --

QUESTIONER: On their program?

MR. RICE: I don’t have a great deal, but let me tell you what I do have, which is that our work with the Egyptians is producing increased understanding on many of the remaining issues. Our goal remains to bring the discussions with the Egyptian authorities to a speedy and successful conclusion on a national economic program that will support growth, jobs, and stability, and that could be supported by the IMF. We’re working constructively with the authorities toward concluding negotiations on a standby arrangement. We look forward to the resolution of remaining technical issues and completion of the preparatory work by the authorities. And let me leave it there.

QUESTIONER: So any sense of timeframe or any detail on what the remaining issues are?

MR. RICE: I don’t have anything for you on the specific timeframe beyond, again, repeating our goal is to see this completed in as speedy manner as possible.

On your second question, we’re looking in particular for early decisions by the authorities on revenue measures to reduce the large budget deficit and on their plans for the use of smart cards to reduce the cost of gasoline and diesel subsidies.

QUESTIONER: Going back to Cyprus, the President of Cyprus asked for renegotiation of some aspects of the program. And my question is this: Did the IMF ever renegotiate programs in the past, and can you tell us a procedure on these cases?

MR. RICE: We look at programs on an ongoing basis. This is generally the case, and that is why we have these quarterly reviews. So the program is an evolving thing, and changes are made along the way. So I am not referring here to any specifics on Cyprus just to be very clear, but that’s the way the process works. The program is a dynamic thing.

Okay, with that I am going to call it to a close and see you on July 11. And for those of you who will have the benefit of the holiday on July 4, enjoy. Thank you.