Transcript

Transcript of a Conference Call by an IMF Official on Greece

July 30, 2015

MS. GAVIRIA: Hello, everyone. I'm Angela Gaviria with the IMF’s Communications Department. Welcome to this conference call on Greece. Here with me is an IMF official, who will make some points and then take your questions.

IMF OFFICIAL: Yes. Thank you. And welcome. I want to focus on explaining to you the process that is now ongoing and the role of the IMF in this regard. Those of you who have been following us closely, and particularly the discussions we've had in the last couple of months, will not find that I'm saying anything that is new, but let me nevertheless repeat where we are.

Let me start from the point that, again, as we've said before, the IMF can only support a program that is comprehensive. What do we mean? We mean a program that ensures medium-term sustainability. There's nothing new to that; every time the IMF goes to the Board, we need to ensure our Board that there is sustainability in the medium-term context.

And this is nothing special for Greece. It's a criterion we apply to all members, to all releases of IMF money, and we will, of course, also apply this in this case. What we have also said is that the Greek situation is very difficult. In order to ensure that sustainability, that medium-term sustainability, there's a need for difficult decisions on both sides and by both sides. I mean, difficult decisions in Greece regarding reforms, and difficult decisions for Greece's European partners about debt relief.

So, for it to --and we have used the phrase many times-- for it to add up, one needs difficult decisions, and you should not be under the illusion that just one side of it can fix the problem. Greece will not be in a medium-term sustainable position just on debt relief, and on the other hand, yet Greece cannot get into a medium-term sustainable position just on reforms of its own. It needs to be a combination of these two sets of issues. What is clear is that it will take some time before the two sides are ready to take these decisions, it was made clear at the meeting of European leaders a few weeks ago that they were not ready to consider the debt operation before the fall.

They said that at the time of the first review of the ESM program they wanted to see implementation of the policies before they are willing to discuss debt relief in the necessary details. And I think it's also clear from discussions on the part of the Greek authorities that some of the necessary decisions regarding particular fiscal structural reforms will only be taken in the coming months.

So I think everybody understands that the IMF can only be in at that time when these decisions on these two sides are taken. There's nothing new here, nothing new on deciding to suddenly have a two-stage approach. It's always been clear that the IMF will only come in once these conditions are in place. So, let me stop here; and I'll take your questions.

QUESTIONER: Thanks for doing this. One quick, just technical question, and then another, perhaps, more substantive one. When you are talking about -- in terms of sustainability, I just want to confirm, you are talking about debt sustainability. Correct? And then secondly, can you be more precise in terms of what you mean the IMF cannot support a program until medium-term sustainability is in place? By that do you mean you will not take a program to the Board for approval? Or, are you saying that you don’t think the Board will approve it without that in place? Can you elaborate on that? Thanks.

IMF OFFICIAL: Yes to the first question. I'm talking about medium-term debt sustainability, but you cannot have medium-term debt sustainability while other parts of the program are not sustainable. So, it's the overall program that needs to be sustainable, but this indeed comes down to a test of whether the debt is sustainable.

On the second question, yes, management will clearly not want to submit to the Board, and I'm sure the Board will not want to approve, a program that does not meet the normal criteria for access to the Fund's resources, and the normal criteria is that there is medium-term sustainability. So, this is the answer.

QUESTIONER: A quick follow. Is another one of your conditions that it be fully financed for 12 months? Is that also a condition?

IMF OFFICIAL: Yes. As always, programs have to be fully financed. We need to have adequate financing assurances, and the way you operationalize this is that we need concrete assurances for the first 12 months, that’s the normal practice for the IMF.

QUESTIONER: I was wondering if you could be more precise about what you expect from the Europeans. Do you expect like a formal commitment to reduce the debt and what is the scale that you are looking at? And also can you also give some clarification on, I mean, does it mean that the former debt program of the IMF that was running until 2016, is dead? I mean, can you clarify that? Thank you.

IMF OFFICIAL: There has been no detailed discussion yet about how this debt relief is going to be provided. There's a menu of options, but there's essentially an agreement; we accept that that discussion will take place in stage 2, and I think that the Greek authorities have accepted that also because it's in the communiqué from the recent Leaders’ meeting. So that’s the conversation that we will have in the next couple of months, but there has not been a detailed conversation about debt yet.

Yes, there is a request for a new program, a new multi-year program. And why? We had a program, and we currently have to replace the program that expires by the end of March. The criteria of the IMF when approving a program is always that the program has to meet its objectives by the end of the program period. The current program is off-track and it will only be able to reach the objectives by the end of the program period, so we need to recalibrate the program and get an essentially longer time to reach the objectives, and this is why we have a longer program now under consideration.

QUESTIONER: If I could just follow up quickly. Can you be more precise? Are you expecting a formal commitment from the Europeans to join them on this new bailout? Can you be more precise?

IMF OFFICIAL: I don’t understand what you mean by the question.

QUESTIONER: I mean, do you expect them to come with the terms of the debt release number to join the new bailout?

IMF OFFICIAL: We expect that by the time we go to the Board there is an explicit and concrete agreement between Greece and its European partners on how to provide debt relief. Yes, we expect that by the time we go the Board at stage 2, an explicit and concrete agreement of how to provide debt relief.

QUESTIONER: Thank you very much for doing this. My question is first about the debt relief. You’ve indicated earlier that there will be a point at which maturity extensions no longer are feasible, and there would need to be haircuts basically, which is a no-go for the Europeans. Can you give us some idea when that point would be reached? And given the drastic situation in the Greek finances, is it, maybe, already reached? And then another, the Greek government has said that in order to basically calm the internal opposition, there will be no additional reform negotiated with the renewed Troika. Is that acceptable to the IMF as long as Greece does everything that it has agreed to so far here in the Brussels summit? Thank you.

IMF OFFICIAL: On the first question, I will refer you to our updated DSA that was released a couple of weeks ago. Our views have not changed since then. We have a mission in the field that just started discussions, actually the mission chief is only arriving today. And so we have no reason to change our views since that DSA.

That DSA said that there’s a menu of options. If we’re going to reach the point where that menu of options will narrow, well, let’s see what these discussions that have just got underway will produce. I don’t have any other views than reflected in the DSA. On the second part of the question, I have not heard the authorities put it like the way you put it. I have heard the authorities say -- or I’ve seen press reports, I’ve never heard it from them -- I’ve seen press reports questioning the need for further measures before the ESM approval of a new program, so in stage one. That I have seen in press reports, but I have not had any – as I said, we have a mission in the field today so I do not know what the authorities’ view and it’s best to ask them directly. But that’s a different issue. What are the conditions for the ESM to disburse at stage one is really between Europe and the Greek authorities. We come in at stage two.

QUESTIONER: In excerpts from the minutes of the Board meeting yesterday that were published in the Financial Times, the German representative seemed to express dismay that the IMF would not be going along, would not be following the process in parallel with them. And so if it’s really the case that -- so it made it sound like it was a live issue at that meeting. If that’s not the case and your decision to wait for stage two was made some time ago, could you confirm who made that decision and when it was made?

The second question: Does this make for a substantive change in the IMF’s role in the current negotiations, the current talks in Europe? Because it sounds like on some level this just might be procedural of whether you reach a staff agreement when your negotiators could be involved in helping shape whatever deal is going to be arrived at. So does this make for a substantive change in what your people will be doing in Brussels and Athens in the coming weeks? Thanks.

IMF OFFICIAL: On the first part of it, I am not going to comment on who said what at the Board. Let me make very clear that the Fund, our Managing Director, myself, we’ve been talking about this to our partners and to the public and we have always made very clear what are the conditions for the Fund. It’s a comprehensive program. There’s nothing new -- I mean, go and look at the Mr. Blanchard’s two recent blog posts. They’re very explicit about that.

They were posted before the summit and I can assure you that at the recent summit and Eurogroup meeting there was no misunderstanding about what is the role of the Fund and when we can come in. There is nothing new here. That was also accepted yesterday and understood at the Board.

Now in terms of -- you say there’s a change in the role of the Fund. It is not correct. We are not just an observer; we’re not sitting in the sidelines. We are participating actively and fully in the policy discussions in the coming weeks. But there is a clear understanding among all of us that these policy discussions will not include at this stage, will not pertain at this stage to a number of issues -- policy issues -- that are critical for a medium-term program. So there’s no expectation that all the issues that would need to be covered for us to have a credible package on the table, would all be settled in the next couple of weeks. So this is another way of saying that part one will be completed while a number of policy issues are still outstanding, we are fully involved in these discussions and I can’t see how we are an observer on the sidelines on anything like that.

QUESTIONER: When does the IMF expect Greece’s arrears to be cleared, and is that a prerequisite for getting involved in any new program? And the second is that given that Greece (inaudible) conditions in the earlier bailouts, including a very aggressive fiscal tightening and actually moved considerably further away from debt sustainability rather than towards it. Shouldn’t there be questions asked about whether the IMF should ever have gotten involved in these bailouts in the first place?

IMF OFFICIAL: On the first point, arrears were cleared a long time ago, several weeks ago.

QUESTIONER: Okay. Sorry. All right. Apologies.

IMF OFFICIAL: So the situation is evolving. And that leads me to the next question also. We are always happy to revisit whether we can do things differently and should have done things differently.

I can assure you that we learn as we go along and evolving circumstances and whatever experience we have will be embodied in any new discussions that we have. And this is of course one of the reasons why we say this requires difficult decisions on both sides.

QUESTIONER: Thank you. I would like confirmation that the new IMF program which has been requested by the Greek government will have the same end period and the same horizon with the ESM program, meaning 2018.

IMF OFFICIAL: There has been no discussion on the exact duration of this program. But my understanding would be that it would sort of broadly coincide with the duration of the ESM program. But I have to admit that those discussions have not taken place yet.

QUESTIONER: Yesterday you briefed the Board. Can you tell us what the Board decided and if they decided to support the mission and the involvement in the third program?

IMF OFFICIAL: Formally what happened was that the Managing Director informed the Board that she has decided to authorize staff to open discussions on a new program that could be supported under the exceptional access policy. So the Board accepted that staff opens discussions on the option and see whether we can get agreement on a credible program that we can support. So that is formally what happened, that the Board accepts that we start these discussions.

MS. GAVIRIA: Well, thank you all. We’ll end this conference call here.

* * * * *