Transcript

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

March 8, 2012

Webcast of the press briefing

MR. RICE: Good morning, everyone, and welcome to this regular press briefing from the IMF's External Relations DepartmentIMF. Let me begin with a few scheduling announcements and then we will move quickly to your questions.

The Managing Director, Christine Lagarde, this evening will be speaking at the Women in the World summit in New York City. She will also be recording an interview there with Mr. Charlie Rose scheduled to air this evening on PBS.

The Managing Director will be visiting China and India beginning late next week. She’ll be in China March 17 to 18 participating in the China Development Forum in Beijing where she will give the keynote address. She will also meet with senior government officials.

From there Madame Lagarde will visit India on March 19-20 to meet with senior government officials and to participate in this IMF sponsored conference, which is, “China and India: Sustaining High-Quality Growth”.

Turning to our Deputy Managing Director Min Zhu, on March 23^rd he will be at the Pacific Island Countries Conference on “Fostering Inclusive Growth”. That’s in Samoa. Our First Deputy Managing Director, David Lipton, will participate in the IMFC Deputy’s Meeting in Singapore on March 23-24. He will then go on to Indonesia March 26-27, and to Korea March 28. He will meet with the authorities in all three countries. And, once again, press registration for the spring meetings in April has opened and you can find more information there on the website or contact our media relations colleagues.

With that, let me turn to your questions, and as usual, your affiliation please.

SPEAKER: Gerry, well, let me start and find out what you have to say about any updates regarding the Greek Board meeting. I believe there have been changes made.

Also, any comments you have on the private sector debt swap that’s going on. It looks like it might be 50 percent. What is the outcome that the Fund would like to see from this so that it can move forward? And if the debt swap is not as successful, does that mean you’ve got to go back and start talking about financing the arrangement with the authorities and with the Europeans?

MR. RICE: Okay, thanks. The Executive Board meeting is tentatively scheduled for March 15. That is, of course, as I’ve said here before, pending completion of the prior actions with the Greek authorities and pending the full establishment of financing assurances including agreement on the PSI (Private Sector Involvement – ed.) arrangement, which you mentioned.

On that, we have an interest, obviously, in the debt exchange being successful. That will require a high participation rate. It’s for the authorities and their legal advisors to determine how high a participation rate can be achieved and as a matter of policy we don’t micromanage that process.

In terms of the future, I think what I’d like to say there is, let’s take this one step at a time. A few weeks ago the Greek authorities agreed the framework of a program with the Euro Group contingent on, as I said, the prior actions being completed and the PSI being completed. The next step in terms of the IMF is for us to take that to our Board for discussion, and as I mentioned, tentatively scheduled now March 15. And we know that that ambitious program is ambitious, does carry risks, but provided all the pieces are in place, all the partners play their part, we think it’s a program that can work to help put Greece back on the path of growth and sustainability.

SPEAKER: Could I just clarify? The March 15 meeting, is that to evaluate and approve the program or is that just a discussion and an update for the Board?

MR. RICE: What’s tentatively scheduled for March 15 would be a discussion and decision on the program from the IMF side. But, again, I did say tentatively and I did say contingent on the PSI actions and contingent on the prior actions being completed.

SPEAKER: I wanted to ask almost the same question, so going forward further, is there a Plan B in case the PSI doesn’t work out? I assume the Fund is working on the premise or hope it works out, but if it doesn’t, are you prepared to deal with it as you know the time is limited, there’s a lot of time pressure?

And you mentioned prior actions. Are you satisfied with the rate, the pace of the Greek government moving on with measures and legal actions? They seem to be working much faster lately than in the past.

MR. RICE: Let me take the prior actions question first because I think I may have a bit more on that rather than just repeat what I said earlier.

On the prior actions we do believe Greece is making steady progress toward implementing these. Most are now in place. Notably the supplementary budget has been passed by the parliament and critical labor market reforms have been enacted.

The authorities aim to have the remaining actions, which cover financial sector, revenue administration, structural reforms, they aim to have those fully in place as soon as possible.

And, again, on the future, and financing and contingencies, I just want to repeat what I said earlier, I think we need to go one step at a time here. We haven’t had the discussion yet with our Board on the program. That’s going to be next week. So, that’s where I’d go with that.

SPEAKER: The big question, I think, is did you decide on the participation from your part for the new program? And the other issue, did Mr. Thomsen give his report to the members of the Board?

MR. RICE: The exact size of the arrangement under our possible extended fund facility has not yet been determined and, again, that’s something that will be discussed next week with the Board where management will propose the size of the arrangement and, again, the Board will take the decision at that time.

I don’t have the information on the exact status of the Board’s report at the moment.

SPEAKER: I think he has to give the report at least seven business days before the meeting. Is that correct?

MR. RICE: Well, we’ll comply with all the necessary conventions to make sure the Board’s satisfied and make sure the discussion can take place in an orderly way.

SPEAKER: Just following up on Greece. If all of the prior actions are not met by the Board’s deciding date, is that a strict line that cannot be crossed or is there some wiggle room for, at least, signs of genuine or at least perceived genuine actions being taken? And then, secondly, if the collective action clauses are triggered by Greece and the CDS market are called for payout, is there concern about the triggering of the CDSes within the IMF as a financial matter within the Euro Zone?

MR. RICE: On the prior actions, I don’t have much beyond to repeat what I said earlier that we think good progress is being made and the determination on that will be made by the Board, the final determination on the states of the prior action will be made by the Board next week.

Speaker: I’m sorry, I’m not asking whether there has been progress, I’m asking whether the IMF, as a principle, it has said that these prior actions must be met, is that a strict requirement that all the prior actions be met or that appreciable progress is enough?

MR. RICE: You know, what we have said is that the prior actions must be met and we’ll be sticking with that principle.

On your question of the collective action causes and CACs and CDS, again, it’s not really for me to comment on that today given where we are but I have indicated earlier that we obviously have a significant interest in the successful debt exchange.

SPEAKER: You mentioned at the start that Madame Lagarde will visit China and India. She will visit China on March 17 to 18. What specific topics will Madame Lagarde address in her talks with officials in China? Will that include additional resources for the Fund or joint efforts for curbing the Euro Zone debt crisis?

Secondly, China’s Premier, Wen Jiabao, recently mentioned that the government is reducing the target of China’s economic growth from 8 percent to somewhere like 7.5 percent. What are the implications for this action to the rest of the world in IMF’s perspective?

MR. RICE: On your second question, we agree with the Chinese government that the emphasis should be placed on the quality of growth rather than the level, and particularly on ensuring that growth leads to improvement in peoples’ lives.

As published in our January World Economic Outlook, the staff of the IMF expected real GDP growth in China to slow in 2012 on the back of the softer activity in the advanced economies.

In terms of the implications, we all know that China is a major player in the global economy with many connections that have implications for others, so we need to look at the impact and I think we would be able to say more about that in April at the time of our next World Economic Outlook.

If you want a bit more on it just now, can I refer you to the G-20 Surveillance Note, which we published last week.

On your first question as to what the discussions will be in Beijing, I think what we could expect is that it would touch on a broad number of important issues, the state of the global economy, the implications of the Euro Zone crisis for Asia, for China, the status of progress in the Chinese economy, and, indeed, the collective effort which has been supported by the IMF membership most recently at the G-20 meeting in Mexico to strengthen the global firewall against potential contagion.

SPEAKER: Do you have any update on Egypt? Are discussions still ongoing? Do you think that political uncertainties in the upcoming elections could have any influence on your discussions?

MR. RICE: Let me tell you that following the authority’s request for an IMF arrangement, which you may recall, we have now received from them a document that describes, in broad terms, their economic program.

Now, in the coming days our staff will be studying that document and assess the proposed policies. Subsequently we expect to schedule a mission to Cairo in the second half of March to discuss the details of the authority’s program and to work on modalities of a possible Fund arrangement.

So, again, answering your question, they would be scheduled probably in the second half of March, having looked at this document which we’ve now received from the authorities, the discussions in Cairo on the modalities of a Fund arrangement. And as we’ve said before, we stress the greatest importance on this program being homegrown and having broad political ownership.

Let me take an online question please. Does the IMF think Italy still needs to go through the enhanced surveillance of the fiscal monitoring as agreed in Cannes by G-20 last November? If yes, do you have a starting date for the fiscal monitoring of Italy?

As I said the last time standing here on Italy, the enhanced monitoring has been very much at the Italian authority’s request and at their initiative. So it would be up to them to decide on the appropriate timing.

What I can tell you is that in the meantime, the IMF staff is preparing for the annual Article IV mission and that is likely to take place now in the spring.

I will take another question online, on Hungary. Where do things stand with the IMF, including on proposed amendments to the central bank law? What I can say on Hungary is that we are expecting a visit from Mr. Fellegi next week and he will meet with our Mission Chief here. That is not going to be a negotiation of a program; it will not be that. It will be a broader discussion. And no meeting with management is anticipated.

And what we have said in the past on Hungary, including the Managing Director in January, is that we’re looking for sustained commitment on major policy issues before proceeding with discussions on a program, the major policy issues including the issue of the central bank law. Let me take another question from the room.

SPEAKER: Two weeks ago you told me that IMF’s work is to elaborate different kind of scenarios about Greece and this is the work of the IMF. I want to ask you, is one of these scenarios the likelihood that Greece could need further funding in the future or even a broader haircut on the Greek debt? To put it in other words, do you believe that these two scenarios are realistic about Greece’s future?

MR. RICE: Just to clarify, the last time I spoke about scenarios it was in the context of debt sustainability analysis and so on, so just to be clear about that.

I think all I can do is to say, again, let’s take this one step at a time rather than projecting into the future and I think your question basically repeats earlier questions. The Euro Group reached an agreement with the Greek authorities, and the IMF is anticipating now discussing with our Board next week a program contingent on the factors that I had mentioned earlier.

SPEAKER: I know that Mr. Thomsen, in the last Board Meeting of the IMF, supported Greece vigorously. Do you believe that his supportiveness to Greece is essential to convince some of the country’s representatives opposed to a new bailout to Greece?

MR. RICE: The IMF supports Greece and supports the Greek people in the efforts they’re making. We have not had a Board discussion of the program, the IMF program. That’s going to happen next week. And, again, we think this program, while ambitious, can help set Greece back on the path of growth and recovery.

SPEAKER: I would like to ask about Egypt. Can you give some details about the general points that the Egyptian government submitted in its reform program? And who, exactly, are going to be representing the IMF mission in Egypt? And the last question, what was this tension between U.S. and Egypt about the NGOs and all this legal and political stuff? Does it have any impact on IMF and the negotiations with the Egyptian government? Thank you.

MR. RICE: On your last question, as you know we’re an international financial institution with 187 member countries, and our work is not affected by bilateral relations between two member countries.

On the composition of the mission, it’s too early for me to give you names and numbers, but we’ll come back to you on that closer to the time.

It would also be, you know, inappropriate to go into the details of the document that we have received from the Egyptian authorities.

SPEAKER: Just generally.

MR. RICE: As I mentioned, we’re assessing that right now. Yes, in terms of general principles what is important for is that, as we said before, that this should be a homegrown program, that it should enjoy broad political support, that it should contain the measures necessary to maintain macroeconomic stability, protect the most vulnerable, and, you know, generally restore confidence. So, those are the broad principles that from the IMF standpoint would be important.

SPEAKER: I realize you’re probably not going to say anything more on the question, but I wouldn’t be doing my due diligence as a reporter, I hope you understand, if I didn’t ask or just point out that the IMF regularly raises issues in all of its reports about its concerns about potential financial or economic outcomes. And that’s the reason why I ask about whether the IMF has any concern about the CACs triggering the CDSes in the Greek situation.

So, just realizing you’re not going to say anything, I want to ask again, does the IMF have any concern about the Greek CDSes being triggered or does it have confidence that it actually could help the system?

And then just separately on a non-Greek issue. ECB left the benchmark rate unchanged this morning. The IMF has been calling for a lower rate. Is that an issue of concern?

And, finally, the U.S. doesn’t look like it’s going to approve the needed quota reforms that were approved in 2010. What issues of concern are there in terms of governance, capital, et cetera?

MR. RICE: As usual you projected correctly and I won’t go further on the Greek question you’ve raised because I think we covered it.

On the ECB actions, given persistent market tensions, we believe the ECB should not hesitate to continue to use unconventional monetary policies to secure orderly financial markets, as the ECB has been doing, and has been doing appropriately in recent days including the so-called LTRO actions, which have significantly eased funding tensions.

I think your last question was about the quota and support for the quota, particularly in the U.S.?

SPEAKER: Yes, it doesn’t appear that it will get past this year given the landscape and I am wondering what the consequences are of not meeting the October deadline on quota reform?

MR. RICE: I think you may have been in Mexico where the G-20 reaffirmed its commitment to implement the 2010 governance and quota reforms. We have welcomed that, of course, and urge countries to ratify the necessary measures and make best efforts toward that goal, as you say, by the time of the annual meetings this year, and that continues to be our position.

As you know, we don’t comment on individual country cases, so, your question is probably best addressed to the national authorities.

I want to make one other comment since we’re on the issue of quota because there were some a bit misleading stories on a Board meeting that took place yesterday. That Board meeting yesterday was actually on the quota formula and it was a preliminary discussion of the quota formula. No decisions were made, and no decisions were expected to be made. Again, it was a preliminary discussion.

If I could just take a minute to try and disentangle this. We have the 2010 quota and governance reform, and that’s on the track that I just described. The membership is urged that best efforts be made to complete that reform by the time of our annual meetings this year.

Part of that reform is a review of the quota formula, which will be the basis for the next quota review, which will be in 2014. What the Board has indicated is that the quota formula review should be completed by 2013.

Let me not say it again, but let me just quote briefly from the G-20 statement in Mexico, just a couple of sentences.

It said that, “We continue working toward the reform of the quota and governance in line with the commitments made by the membership. To this end, the G-20 members reaffirm their commitment to implement in full the 2010 governance and quota reform by the agreed date of the IMF-World Bank annual meeting,” so that’s later this year, “and to a comprehensive review of the quota formula to better reflect economic weights by January 2013, and the completion of the next general review of quotas by January 2014.”

I think it just clarifies, and again, clarifies what yesterday’s Board meeting was and was not.

SPEAKER: I also want to just ask about Egypt and does that mean that, like Greece, the Managing Director is expecting letters of sign up from all the Egyptian parties on this?

And is that included in the document that’s going forward now? And can I just ask you, the other issue you forgot other than the formula and the quotas are the seats. I believe that has to be done in August. Is that correct? With the chairs on the Board, where the Europeans have to give up some of the seats? Do you have any update on how that’s going?

MR. RICE: On the last question, that issue is linked to, you were quite right, the broader quota and governance reform. On the scheduling, let me come back to you on the exact scheduling of how those two things intertwine.

But what the membership has said is that the overall reform should be completed, that best efforts be made to complete by later this year.

And your second question was on --

SPEAKER: On Egypt and the buy-in of all the parties. I mean, the question with Egypt is the uncertain political environment and who negotiates this program and whether it sticks post the elections coming up.

And is there a signing already in these documents that have been given to the fund now or does that come later?

MR. RICE: What we have at the moment, as I mentioned, is this document from the authorities and that’s being assessed. I’m not going to get into the details of what’s in that document, as I mentioned earlier, but what is fundamentally important to us is that there would be broad political ownership.

I’m going to take these last two questions on Greece and then I’m going to wrap up.

SPEAKER: Because we are talking about quotas, what is a quota for Greece? Because as I’m sure you know, the Europeans are expecting you to give more than one-third this time, again, more than $14 billion. So, what is the quota for Greece? And also, on the IMF’s participation, can you tell us at least how many proposals you have on the table?

MR. RICE: I don’t have the Greece quota number to hand. We’ll come back to you after the briefing.

In terms of the IMF participation, the size of the loan, again, that’s something to be proposed and discussed with the Board next week and I don’t have those numbers, ranges, for you today. But next week with the Board.

SPEAKER: My last question is, is the IMF concerned about the early elections that are probably coming in Greece and that could derail or at least put at risk the implementation of the structural reforms?

Do you have any concern on that?

MR. RICE: What I would say is that we are encouraged by the apparent degree of political consensus that has emerged in Greece around going forward with the program, and I already mentioned the parliamentary measures. We have also received from the leaders of the major political parties written commitments to the new program.

They have also indicated that elections notwithstanding and election results notwithstanding, that they will remain committed to the objectives of the program and, again, we welcome this degree of political consensus.

I’m going to stop there. Thank you all for being here today. Thanks to those online and we’ll see you in a couple of weeks.