Transcript

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

March 3, 2011

Webcast of the press conference

MS. ATKINSON: Good morning. I’m Caroline Atkinson, Director of the External Relations Department at the IMF. Welcome to the regular bi-weekly press briefing. As usual it is embargoed until 10:30 a.m. Washington time, 1530 GMT.

So just to start off with a couple of announcements: Today, the Managing Director is on a visit in Latin America, and he will be giving a press conference in Brazil at 2:00 p.m. local time, so that’s later on today.

Next week we have a number of things happening. On March 7 and 8 we’re hosting here a conference on “Macro and Growth Policies in the Wake of the Crisis”, and it’s going to be hosted by a number of the world’s most noted economists. Our own Olivier Blanchard, the Economic Counselor and Director of Research here; and David Romer who is working here for awhile and is at the University of California in Berkeley; and also two Nobel Laureates, Michael Spence of Stanford and Joe Stieglitz, Columbia University.

The Managing Director, Dominique Strauss-Kahn, will be delivering opening remarks on Monday, March 7, at 8:45 a.m. And later in the day the First Deputy Managing Director, John Lipsky, will deliver a luncheon address.

This conference will be webcast live on IMF.org. There is a very nice Web site for the conference, which is already available for people to see.

Later on next week, on March 11, the Managing Director will be visiting Japan to meet with senior Japanese officials as part of our ongoing work engaging with Asia and also discussing G-20 issues.

As part of the continuation of our work with Asia, the IMF and the government of Indonesia will jointly hold a high-level conference at the end of next week on capital flows, and that will be in Bali in Indonesia. It’s a one-day conference on the 11th. It will bring together academics, policymakers, investors, researchers in Asia and other large emerging markets to talk about the issues of capital flows and what have been their recent experiences, what are the best ways to manage these.

I also wanted to let you know that our new issue of the quarterly Finance and Development magazine is released today. It’s available on our Web and also in hard copy. It focuses on Latin America’s transformation and also has an interview with former Managing Director, Michel Camdessus, on the future of the international monetary system.

For the press I also wanted to alert you that the press registration is opening today for next month’s spring meetings at the World Bank and the IMF. Those meetings take place on the 15th and 16th. You can sign up for accreditation on IMF.org beginning today.

You’ll notice on the schedule that the day of the release of the World Economic Outlook is going to be a Tuesday this time, Tuesday, April 12. The World Economic Outlook will be issued in the morning and then later on that day the Fiscal Monitor will be issued, and the following day the Global Financial Stability Report will be released.

So that’s a lot of housekeeping things and I wanted to now turn the questions to you. Please identify yourselves and your affiliation before your questions. Thank you.

QUESTION: Today we saw the FAO bring out in their new results of the new food index that shows worrying trends increasing, especially in cereals now, which impacts a broader number of people in developing countries. I was wondering if you have any comment on whether that means that you’re becoming a little more concerned. I mean it seems to broaden or make the impact a little bit bigger right now.

And on top of that, I was wondering if you have any comment on the impact on inflation. You’ve seen the ECB today, the comments on concerns about this. You’ve seen that in almost every one of your PINs coming out lately. How do you think these countries should be addressing this?

MS. ATKINSON: Right. On food prices first of all, we’re of course extremely concerned about rising food prices, in particular because of their impact on the poorest and most vulnerable wherever they are and in particular the low-income countries, but not only there. That is a general concern. So far one thing that perhaps helps a little bit is that in some of the poorest countries, with subsistence farming there have been quite good crops in Africa. Nevertheless, this is, of course, a concern.

Turning to policy measures: it’s important that people who are most vulnerable should be protected rather than products be subsidized. So it’s important that you have well-targeted ways of supporting the most vulnerable in countries. More generally, the approach in terms of inflation, I think, depends on the importance of food in the consumer price basket and the monetary policy regime that a government has. I mean, typically, governments or central banks will accommodate a first-round impact of food prices with a focus on making sure that there isn’t a longer term impact in pushing up inflation on a permanent basis, and that’s generally what I think would continue to be the advice.

In terms of what our PINs have been saying, there are a number of countries that, quite apart from what’s happening to food prices, have been growing very rapidly, getting to the point of potential overheating and, therefore, central banks have been quite appropriately beginning to tighten monetary policy there. I mean, Brazil is an example today. And, of course, a central bank should always be keeping their eye on inflation. Thank you.

QUESTION: Good morning. We know that in the upcoming days you’re going to release the report on Greek economy before the fourth installment of loans. May you outline, generally, some details about this report before its release? May we, should we, know something?

MS. ATKINSON: No. The Board meeting is scheduled for March 14, and we will release all of the documents after that. I mean, typically, it may take a day or two, and so you’ll be able to see the details of the report then. And, of course, you’re aware that we released some information at the end of the mission, which took place in the first half of February, so I’m not going to go into that now. Yes?

QUESTION: Is it true that your relations with the Greek government have been frozen after the incident of the last press conference in Greece?

MS. ATKINSON: Absolutely not. We have very close and strong relations with the Greek government. We have the highest respect for their policies and their role in outlining what they believe to be the best way to address this crisis in the interests of the Greek people and that is their responsibility for which we have the highest respect.

QUESTION: Do you have any comment on the new government of Ireland that has been formed, and I wanted to know when you expect to go and speak to them about possible changes? The MD indicated yesterday that there were going to be talks. We were just interested to know more of a timeframe.

MS. ATKINSON: We are expecting at the moment that, again, a final formation of the government I think is pretty fresh. We are expecting that we may combine the first and second reviews because of the slippage and that probably a team will go early next month. That’s the kind of timeframe, and it will be a proper, full-fledged review mission at that time.

QUESTION: For the record, I mean the IMF is open to renegotiating targets and so on. In this program what is going to be your approach in these discussions?

MS. ATKINSON: The approach will be our normal one, which is that the overall goals of the program, which of course are to restore Ireland to long-term and sustainable growth with jobs and to address the issues in the financial sector, which have been at the root of many of the difficulties in Ireland. So those overall program goals will remain the same. Of course, whenever we have a review mission, we’re updating on the basis of the latest information, and we will discuss with the government the best way to achieve those goals.

QUESTION: And also just for the record, have you been in touch already with the economic officials?

MS. ATKINSON: I’m not completely sure about that because I think the government was only formed just in the last day or something. So we can get back to you on that, but I’m sure that we will soon be in touch with them at any rate. And, of course, with the officials, we remain in contact because we’re also talking about how economic developments are proceeding.

I have a couple of questions online. There is one asking “When should the Ukrainian government stop the recapitalization of troubled banks?”

Well, as you know, with the recapitalization of the banking system, there are some banks that have not yet had their capital brought up to a satisfactory level. It’s expected that the program for completing the recapitalization should finish, I mean should be achieved, in coming months. I believe that’s what the authorities expect.

I also have a question on Pakistan, asking for an update on the talks between Pakistani officials and the IMF team now present in Islamabad. And as usual we don’t comment on discussions that are taking place with people in the field, but these talks are part of the ongoing dialogue, close dialogue, which we’ve been having with Pakistan over their reform program. Yes?

QUESTION: I’ll just come back to Ukraine. Are there any further developments? I know that the IMF was waiting for the government to respond because the talks are still ongoing for the next -- I was wondering if there’s any update on that and whether this is going to move to a conclusion anytime soon?

MS. ATKINSON: I have no update on that. I mean, as you know, there was a mission and talks are continuing. We remain in dialogue.

I have also a question on New Zealand, saying “There have been news reports that the IMF is lowering its economic forecast for New Zealand. Is that correct and if so, from what to what?”

There is actually the Article IV Consultation Mission for New Zealand, the 2011 Consultation Mission that will be going I believe at the end of next week. And I’m sure obviously we’ll be looking at the economic forecasts then. Given the disruption from this earthquake, and of course, the human toll is the most terrible for New Zealand, the earthquake in, two quakes, in Christchurch. There will, of course, be some impact on economic activity. It’s often a little hard to work out just what that will be because in addition to the destruction, there is then rebuilding that tends to offset some of the impact on output. And our current forecast, our most recent forecast in January, had been for 3 percent growth this year. So the mission, I think they think now it’s likely that they will reduce that somewhat, but they will be doing that work when they’re in the field. Yes?

QUESTION: I would like to ask you, are you still concerned about the huge problem of the Greek debt? And do you think that European leaders in the upcoming European Summit should discuss that issue? And what are you answering to those people who insist on restructuring of the Greek debt like the professor at Harvard, Mr. Kenneth Rogoff?

MS. ATKINSON: The Greek authorities have made clear all along that they don’t believe at the moment that restructuring is the issue for their debt, that it’s a good way out.

On the question, “Are we still concerned?”, Obviously, the fiscal situation in Greece and the high debt is a big part of the problem in Greece. It’s not the only part because there has also been a part that has to do with the need for structural reforms to unleash growth and provide jobs in Greece. And so we have had, the authorities have always had, a program that had two pillars: One was reforms to promote, to open up the economy, to provide a better environment for growth and job creation and competitiveness and that’s one pillar which is very important. And the other pillar is to address the problems in the public finances.

QUESTION: I was going to ask you about Cote d’Ivoire. I was wondering if you have -- I asked this question in the last briefing and there wasn’t an answer and was wondering whether you have any sort of idea on what the regional impact is from Cote d’Ivoire.

MS. ATKINSON: Yes. That’s a very important issue. I don’t have numbers for you now. We will be discussing that in the context of a Board discussion on the West African Economic and Monetary Union states.

Obviously Cote d’Ivoire is large enough that it does have regional implications, and those are partly financial, with the regional bond market, partly through immigration, (We know that there have been people fleeing, for example, to Liberia), partly through trade links. So all of these are important. And it’s just, in these situations, often very difficult to know and to isolate the impact from one particular event.

And the big thing, of course, in Cote d’Ivoire is that we deplore the violence, and certainly look forward to there being a resolution to that situation.

But we will have more for you, probably in the coming weeks, on that regional spillover issue.

QUESTION: Right. On the one issue that one can gauge it is because, you know, countries can’t export their goods easily, and therefore there’s no revenue coming in and so on.

MS. ATKINSON: No.

QUESTION: So has there been any increase in requests from these countries for possible temporary assistance?

MS. ATKINSON: No. Of course we stand ready to help countries that have balance-of-payments needs. And, as you know, our support for low-income countries, and for African countries, was ramped up very considerably in the wake of the global financial crisis.

So, you know, we stand ready to do what we can.

QUESTION: Some of what you said, I keep your phrase saying that “at the moment” the reconstruction of the debt, according to the Greek government, is not an option. You believe that in the future, it may be an option, the reconstruction of the debt?

MS. ATKINSON: No. You’re quite right to pick up on that. I don’t want to speculate about the future. I can just talk about what is currently in the program. We expect the program to be successful. There are different paths for that success, but it’s a difficult program. The government is very committed to carrying it out.

And what the government has made clear is that default is not an option.

I have some questions on line. The first one is, “Is inflation a worry for the U.S. economy?”

I think right now inflation is not a worry for the U.S. economy. In fact, until recently, the Federal Reserve, and we were supporting that, has been taking steps to limit the risk of deflation, or disinflation. And that risk, they took steps to address that risk. We thought those were appropriate.

There are not indications, that I’m aware of, in the markets of a worrying trend towards inflation.

That -- his last question, another question is a little bit have-you-stopped-beating-your wife, but, “Is the U.S. Federal Reserve risking contributing to U.S. and global inflation by not putting the brakes on QE2?”

And I would just turn that around and say that for the U.S. economy, and for the global economy, what is a high priority is to achieve sustainable growth. And the global economy is helped by a strong U.S. economy. And it was in that light that the U.S. Federal Reserve announced, and began to implement QE2.

Obviously, over time, they need, as Federal Reserve Chairman Ben Bernanke said this week, the Central Bank is always looking at the balance of risks, and maintaining low inflation is one of the key objectives.

Another question: “The 2012 budget from the Administration says the U.S. is to stabilize the debt-to-GDP ratio in 2013.” And he says, “Is that realistic and credible?”

I would just say that we do reemphasize that addressing the long-term fiscal issues of the United States is extremely important -- again, for the U.S. economy, but also for the global economy.

And what we see as the most important aspect of that is putting in place a credible medium-term strategy to address, the pressures that will come on the budget from entitlements and other medium-term pressures. And the focus on stabilizing the debt-to-GDP ratio is indeed an important goal. Stabilizing, and then reducing.

I also have a question online about Egypt. “Any update on Egypt? Things have been disrupted there for more than a month. How are their reserves holding up? Is there any evidence of the Central Bank restricting capital movements? And any concern about the fact that the stock market remains closed?”

On Egypt, we of course are staying in close contact with the authorities. There’s just an extraordinary amount of uncertainty about how the change there will affect the economy in the short term, where clearly there’s some disruption and, perhaps more importantly, over the long term, where there is a chance to put in place policies that will promote inclusive growth and jobs.

On the financial side, there are some issues about the banking system. I mean it seems that people are still able to access some funds. And so that kind of basic commerce is continuing. I’m not saying that we know things, but there hasn’t been evidence of a major crash or anything.

Yes?

QUESTION: I was just going to turn to the Middle East. I wanted to find out if the IMF was at all involved in anything on the freezing of assets of not only Libya, but of the other former rulers in the region.

MS. ATKINSON: Right. Right. That’s a good question. Of course, we don’t have bank accounts for people, so I’m not aware of us being involved in that way.

I have a question about Nigeria, asking to describe the IMF’s advice on the naira, pointing out that Nigerian labor groups have opposed -- would oppose devaluation.

What I can say on the naira is that we are not advocating a particular rate, or a particular policy, not advocating a devaluation. I believe that [Resident Representative, Scott Rogers] has described this at length in the press -- and we’re happy to provide that -- in press interactions in Nigeria.

We have spoken in favor of monetary policy being focused against inflation a little bit more directly, and also maybe some scope for flexibility for the exchange-rate regime.

Yes?

QUESTION: I’m just coming back to the issue of inflation. Because, I mean, this is a new development going on for the last week. And we’ve just had Trichet on the wire saying that a rate hike next month is possible. I guess the one thing that developed countries are looking at now is whether this is just a spike in prices and stuff and, therefore, you know, that needs to be controlled? I know what Bernanke said yesterday, that he just thinks that it is just a spike, and that it will come down. But the European area seems to be more affected. So with all these new inflation pressures, is there a concern now that that could affect long-term growth, or that these countries can actually try to stabilize it with just one hike?

MS. ATKINSON: I guess it depends which countries you’re talking about. We have been talking for awhile about there being a two-speed recovery. And clearly there are some countries, mostly emerging-market countries, mostly, but not only -- where there’s been strong growth and it’s been appropriate, many of them have taken steps to tighten monetary policy to avoid overheating, or curb overheating. And we’re fully supportive of that. It’s important to be ahead of the curve there.

There are other countries where there really has not been much sign of inflation, and where output is still -- where growth is still being below potential.

And there are some where they may be wondering about whether their economic growth is getting to a point now where it’s appropriate to move away from some of the very accommodative monetary policy that was in place during the great recession. But I would separate that issue -- which is more tied to underlying growth and so on -- a little bit from, “Well, what should be the response to particular increases in prices?”

And then for the advanced economies, probably the oil price is a more potentially significant one than what’s happening on -- and there, I would just say that there is tremendous uncertainty.

Because what’s happening now is a combination: there may be some long-term demand effect on commodity prices because of the recovery that’s taking place, and developments in Asia and so on. But there are also obviously short-term supply concerns. Not actual impact, because there may be offsetting supply.

The markets seem to be suggesting that they expect it to be relatively short-lived. But, you know, the markets are very volatile, and that could change tomorrow.

So I think my main comment on the oil price would be that we’re obviously living in a time of uncertainty. Also, a protracted oil-price increase would have -- that came from the supply side, would have an impact on inflation, but also on growth. So that’s another thing that would have to be balanced.

MS. ATKINSON: I have some questions online about Argentina, asking whether we have a date for the technical mission that has to go to Buenos Aires.

And we don’t. You know, we expect that it will take place. I think, as you know, we’ve been clear about the likelihood that there would be -- there’s been one trip and there would need to be more.

Another question: “Yesterday Mr. Strauss-Kahn said that maybe we’re going to have a wedding between Argentina and the IMF. And what is missing for fixing the date of the wedding?”

I think I’m going to leave the Managing Director’s remarks. They seem to sum it up.

And there is another question about whether we are talking about the possibility that the consultation mission could come after the IMF finishes the report on the national inflation index.

I think the important thing to focus on is that we have the technical assistance discussions with INDEC, and those are not completed yet. And I don’t want to speculate about what happens after that.

QUESTION: I don’t know if you want to make any comment on what Mr. Strauss-Kahn had said in the last interview, latest interview, in a French channel, about the unilateral intervention of IMF, which was asked by the Prime Minister of Greece, on December of 2009, before the European support?

MS. ATKINSON: I’m sorry, you’ll have to give me a bit more than that. I imagine that whatever he said will stand.

QUESTION: Yes, Mr. Strauss-Kahn had said that Mr. Papandreou had asked him for his support, for the IMF support, and the IMF intervention on December 2009, before the European leaders come up with a European solution in cooperation with the IMF.

MS. ATKINSON: Well, I’m sure that the Managing Director was in contact, as he is with many European leaders. I think what’s important to remember is that the work with the IMF, the EU, and the European Central Bank to support Greece was a very successful sort of tripartite cooperation and collaboration, in support of the Greek economy.

And I think that was a very important element of its success so far, and of the ability to provide all of this financing in an appropriate way, for the Greek economy.

I have another question on Libya, he talks about our comments on the Qaddafi government’s policies in early February, and “ -- will events make the IMF modify the way it analyzes?”

Of course, we’re always learning from events. So I will just say that.

I do feel that the change has shown that -- or what’s happening in the Middle East has shown the importance of some of the issues that the Managing Director, and the staff, have pointed to for awhile -- the importance of having inclusive growth, of having equity in societies, and providing jobs. And those issues are certainly -- have been highlighted for awhile, as we’ve talking about the Middle East, as other places.

And clearly, events have shown how extremely important those elements are for economic stability and, more importantly, the political system.

Another question, “Are we confident that EU officials will solve their debt and budget problems decisively by the end of March, or they will only band by time with a grand compromise?”

So what I will say on that is that we’ll see what kind of policies are agreed. I will repeat that the European Union and the Euro Zone members have shown an ability to come together to resolve problems until now. So I think that we’ve expressed confidence that they will do that again.

QUESTION: Since we’re on the EU issue, I just wanted to double check that Portugal hasn’t, in the last few days, come to you guys to ask for financial aid? Or there are discussions on the EU on this?

MS. ATKINSON: No.

Okay, thank you very much. Thanks to those of you on line.