Transcript

Transcript of Online Q&A Session On Emerging Market Economies With Christine Lagarde

February 5, 2016

Transcripts Argentina and the IMF Republic of Azerbaijan and the IMF People's Republic of China and the IMF Greece and the IMF India and the IMF Nigeria and the IMF Ukraine and the IMF What does it mean? Emerging Markets Debt Exchange Rate Debt Relief More > Free Email Notification Receive emails when we post new items of interest to you. Subscribe or Modify your profile

Washington, D.C. Thursday, February 4, 2016 Webcast of the press briefing MR. RICE: Good afternoon everyone and welcome to the briefing on behalf of the International Monetary Fund. We’re delighted to be able to interact today with journalists all around the world particularly on the topic of emerging markets and I’m especially pleased that we have joining us today Madame Christine Lagarde, Managing Director of the IMF. MS. LAGARDE: Good morning. MR. RICE: Madame Lagarde just gave a speech here in the Washington area -- the University of Maryland actually -- on the role of emerging markets in the global economy. Very topical. So we’re going to focus on that issue today and take your questions and cover as much as we can. I’m very pleased to say that this is a fairly innovative way that we’ve been doing these press briefings here at the IMF. I’m very pleased to say that we’ve had lots and lots of questions asked online already. And so we’re going to get to those. I’m going to group a number of them because as you will understand many of them are around the same issue, but we’ll try and get through as many as we can. With that I’m going to go to the first question and indeed it’s a broad set of questions around the emerging markets. “Do you feel that emerging markets were over promoted by Wall Street investment banks and others in recent years without due regard for the fact that we’re still developing countries?” Is one question. “Many emerging markets appear to be exposed to both demand softening from China and the broad-based commodity priced route. Do those nations have sufficient buffer, adequate reserve levels and exchange rate flexibility or does the IMF expect stronger demand for its financing services?” Finally, one other question: “Can you Madame Lagarde provide more details about this reference to the expansion strengthening of precautionary financing, the global safety net and what would that look like? Would this be a credit line with more or less conditionality?” An interesting group of questions. MADAME LAGARDE: That’s a whole range of questions, Gerry. First of all, I’m a little cautious with putting all developing and emerging countries into the same group because each and every one of them has its own specificities. Clearly Brazil and Russia are in a particular condition, recession, both of them, while at the same time Mexico is doing fairly well because it adopted quite a few reforms and India is also progressing quite well from that group of emerging countries; then you have all the developing countries which are in a different position as well. So that’s my first point. Each and every one of them is going to be a different case and I think I feel particularly strongly about Africa because a lot of people think Africa at large. Well Africa is more than 50 countries and each and every one of them has its own particularities and its particular economic situation. That’s number one. Number two I think that some of those countries have actually adopted a policy mix which has helped them cushion the various shocks that we are facing in this new economic reality. If I look at a country like Colombia , for instance: it has taken the right fiscal approach, the right monetary approach, letting the exchange rate float and using it effectively as a buffer. If you look at other countries they have not yet adjusted to the oil shock and they have seen their revenues really dwindle and be reduced significantly. Third, if countries take the right policy decisions and if they have the right mix of more efficient spending -- adjusting the sort of business model to that new reality from a revenue point of view, if they have an exchange rate policy that is sensible and that they can use as a buffer, without pegging unnecessarily and losing a lot of reserve or resorting to some funny, protective rules that are not adequate -- they can actually weather the shock and adjust their models, so that, instead of relying heavily on some revenues from export of oil for instance, they can diversify the economy. Now, having said that, some of them are facing a really difficult set of circumstances and my hunch is that there will be more demand addressed to international and multilateral institutions such as the IMF in order to help both in terms of public finances and in terms of overall balance of payment situation, and we are ready to do that without any stigma associated to the relationship that we have with those members. Now in terms of financial safety net, we at the IMF have taken the view that the financial safety net is part and parcel of a good international monetary system and needs to be strong and needs to be readily available to face any circumstances either at source, when a country is facing a massive shock which is endogenous, but also at what I would call ‘the receiving end.’ When it’s an exogenous shock and the country is,in a way, the collateral victim of what is happening elsewhere, for instance, on the markets. So we will be working on financial instruments whether they are the existing ones like, the Flexible Credit Line or the Precautionary Liquidity Line, or other types of instruments that will really address the situation of those countries with a degree of conditionality that will depend on their respective situation. But where we can be available to actually give a hand during the shock period. MR. RICE: Thank you very much. Another related question but broad issue and I’m taking the specific question here, many have asked I’m taking this question. “Madame Lagarde you said recently troubled oil countries keep my up at night. Is there any change or any news that would make you sleep a little bit better?” MADAME LAGARDE: Well, I think you have to look at any circumstances, any situation, from a threat and an opportunity point of view. I think the great opportunity that the low oil prices have to offer is the fact that subsidies that have historically been paid from state, government revenue to encourage the consumption of oil, particularly in oil producing countries, these subsidies could much more easily be removed and replaced by targeted safety nets that will help the poor people, or will actually unleash fiscal revenue that can be used to encourage education, support health. What would put me back to sleep is the certainty that those countries that benefit in a way from the lower price of oil can actually remove the subsidies that are totally counterproductive and replace them with good and efficient spending of fiscal revenue for the poor, for those that need education, for those that need health. MR. RICE: Thank you very much. Of course many questions as you might anticipate around China. So again a clutch of questions, let me just ask a few: “What is the IMF’s best- and worst- case scenario for China in 2016?” “How well has China communicated its economic currency and monetary policy so far? And what should they do to improve?” Finally, “how serious is the capital outflow from China right now and what are the main reasons behind it? What can China do to address this issue?” MADAME LAGARDE: China is going through a massive multi-faceted transition. We do not expect a hard lending of China as has been talked about for many years actually. We believe that if China has a sound macroeconomic framework, if it faces and accepts the reality that it is itself calling for which is of quality and sustainable growth, which will give a lower growth rate than what it has known for a long time and that should be accepted. If it has a monetary policy that is the one that they have recently changed -- the currency variation that has been adopted and it is well communicated and adhered to -- no massive variations, continuation of what has been announced – the qualitative growth on the one hand, the more market-driven determination of exchange rate and more flexible monetary policy and more importantly continuation of the reforms that have been identified by the third Plenum… I’m thinking hear particularly of the state owned enterprises that need to be reformed and some of them probably addressed in their financial equilibrium. So if all of that is done – and, fourth point, well communicated -- because we all need certainly and markets probably more so than anybody else. So if all of that works we don’t see that transition to be a negative overall and we think that China can transition through that period with a degree of difficulties and obstacles and some volatility as well, but it can do so without that hard lending that has been mentioned here and there. MR. RICE: Thank you. I’m going to turn to India and a couple of questions from that part of the world. Again many questions and I’m just picking a few which I think are representative. “India’s exports have been falling in each of the last 13 months. Its industrial growth has remained tepid in the last few months. GDP growth in the first half of 2015, 2016 has been around 7.2 percent, the IMF however seems to be quite bullish on India, can you explain the IMFs optimism?” And then “with India’s increased quota in the IMF is there any change in the role of India in the IMF that you envisage in the coming months?” MS. LAGARDE: The IMF is quite bullish about India, and our forecast for 2016, 2017 is 7.5 [percent growth.]So we see India as benefitting, actually it's one of the major beneficiaries of the lower oil prices. When you look at the scale of benefits for particularly the emerging countries, India comes out, you know, way ahead. We also believe that the monetary policy, the taming of inflation is also going to benefit the very large domestic market of India, and we believe that consumption is going to be one of the key drivers. All of that of course, with the hope and the provision, if I may say, that the trend of reforms identified by Prime Minister Modi, can actually proceed, whether it's in the fiscal area, by way of implementing the goods and services tax, significant reform like the land reform that is considered. I think those reforms are actually going to be critically important for the unleashing of growth potential that India has to offer. I would add one additional component which we regard as important, and that would be the investment in infrastructure that is so badly needed in many countries, but in India in particular, where there are bottlenecks, both in terms of physical infrastructure, as well as, I would say, administrative infrastructure, and those are key policies to implement. MR. RICE: Thank you. I'm turning to Latin America, and in particular to Argentina, "Madame Lagarde, what is your view of the ongoing negotiations between the Argentine Government and the debt holders in New York City? Could we see Argentina having access to financial markets shortly and also what are your views on the New Government's economic measures thus far?" MS. LAGARDE: Well, first on the negotiations, we are very encouraged to see that Argentina, and its new leadership, has taken the initiative to enter into negotiations with Argentina creditors. It's been weighing on the country, and if it results in a fair and balanced outcome, that will be supportive of Argentina returning to the financial markets, and restoring its financial position, it's a real plus. The macroeconomic policies that are currently identified by the new team and the new authorities in Argentina are very encouraging. And we hope that it will stabilize the Argentinean economy. We hope that, in particular, the determination for transparent data - the state of statistic emergency that has been declared by the Argentinean authorities - all of that is good. And we really support it. MR. RICE: Thank you. I'm swinging to other parts of the world, we are touching on Central Asia, and Africa, but it's a joint question. That is, "What is the likelihood that Azerbaijan and Nigeria will need IMF loans? Madame Lagarde, you have said that these countries worry you, given their heavy reliance on oil. So, again, what is the prospect of IMF financing?" MS. LAGARDE: The IMF remains available to all its members, so the moment we are asked to help, we'll do the best we can to help. Both countries, Azerbaijan and Nigeria, have been hard hit by the oil price decline shock, because their economies depended heavily on oil exports, both in terms of trade, and in terms also of revenue. When you lose a lot of that, because the price decline was about 70 percent, then clearly it puts the economy under shock. Policies adopted by the two are different. Azerbaijan has certainly taken a good fiscal approach, is reassessing spending, is really trying to restore its position, and it's also using the exchange rate as a buffer. Nigeria is not there, and we certainly hope that in terms of identification of fiscal resources, removal of oil subsidies, an exchange rate policy that is sensible, in the sense that it is not going to waste reserves, we have in particular indicated that a persistent pegging of the naira would not be such a good idea. So, they have to adopt their policies, they have to adopt their model, and if they need IMF's help, we'll be ready to help. No question about that, and no stigma associated with it. They are clearly victim of an external shock, and they have to face a response, which is a national response to that situation. MR. RICE: Thank you very much. I'm swinging to Europe, and in particular to Ukraine,. The question is, "In the context of recent events in the Ukrainian Government, the Economy Minister quits, accusing some officials of political pressure and corruption. How will the Minister's departure affect Ukraine cooperation with the IMF? Could it be a reason to cancel or postpone the next IMF loan tranches for Ukraine?" MS. LAGARDE: Well, Minister Abromavicius, while in his position as Minister of the Economy, had conducted some really good and solid reforms, to make sure that direct investment would be welcome in Ukraine, to sanitize the environment to the extent that he could, and I would like to pay tribute to his efforts. His recently announced resignation is of concern. If the allegations that he makes in his resignations are correct, then it is obviously an indication that the anticorruption measures that were committed to by the Government are not yet working. And there is more progress to be had in that area. We've known that all along. Clearly, the first step was to stabilize the fiscal situation of the country, to make sure that it was not losing its reserves as it did at the time, to adjust the price of energy, and all those steps were taken. But we have known all along that in relation to corruption a lot of work needs to be done, and it has to be implemented and forced rigorously, because the authorities are accountable, not only for the Ukrainian people, but also to the international community. MR. RICE: Thank you very much. I'm going to take one more question, and I'm going to stay on Europe actually, it's not an emerging market question, and I'm going to break our own rule, if that’s okay with you. But there are many, many questions on Greece, and I'm going to take on question as representative. Just because of the volume. "Madame Lagarde, it is reported that the IMF is blocking progress in the discussions in Greece, and insisting on extremely harsh pension reforms. Is this a fair description of what is going on? Also, Madam Lagarde, you met recently with Prime Minister Tsipras in Davos. Can you tell us, is the IMF on the same page about which reforms that Greece needs to do, when it needs to do it, and in order to get the IMF aboard for the Greek Program?" MS. LAGARDE: Okay. I might repeat a few things, but I will also try to drill down a bit. First of all I have always said that the Greek Program has to walk on two legs. I have always said that the Greek program has to walk on two legs: one is significant reforms and one is debt relief. If the pension [system] cannot be as significantly and substantially reformed as needed, we could need more debt relief on the other side. Equally, no [amount of debt relief] will make the pension system sustainable. For the financing of the pension system, the budget has to pay 10 percent of GDP. This is not sustainable. The average in Europe is 2.5 percent. It all needs to add up, but at the same time the pension system needs to be sustainable in the medium and long term. This requires taking short-term measures that will make it sustainable in the long term. I really don't like it when we are portrayed as the “draconian, rigorous terrible IMF.” We do not want draconian fiscal measures to apply to Greece, which have already made a lot of sacrifices. We have said that fiscal consolidation should not be excessive, so that the economy could work and eventually expand. But it needs to add up. And the pension system needs to be reformed, the tax collection needs to be improved so that revenue comes in and evasion is stopped. And the debt relief by the other Europeans must accompany that process. We will be very attentive to the sustainability of the reforms, to the fact that it needs to add up, and to walk on two legs. That will be our compass for Greece. But we want that country to succeed at the end of the day, but it has to succeed in real life, not on paper. MR. RICE: Madame Lagarde, thank you very much indeed for spending this time with us. Let me apologize to colleagues if we did not get to all your questions for today. As I said they were voluminous, and we tried to be representative. I hope you all get a chance to look at Madame Lagarde speech, which she gave just a short time ago, at the University of Maryland, which also refers a number of these topics. I want to thank you for being online with us today, and look forward to seeing you again, soon. Thanks very much.

Webcast of the press briefing

MR. RICE: Good afternoon everyone and welcome to the briefing on behalf of the International Monetary Fund. We’re delighted to be able to interact today with journalists all around the world particularly on the topic of emerging markets and I’m especially pleased that we have joining us today Madame Christine Lagarde, Managing Director of the IMF.

MS. LAGARDE: Good morning.

MR. RICE: Madame Lagarde just gave a speech here in the Washington area -- the University of Maryland actually -- on the role of emerging markets in the global economy. Very topical. So we’re going to focus on that issue today and take your questions and cover as much as we can. I’m very pleased to say that this is a fairly innovative way that we’ve been doing these press briefings here at the IMF. I’m very pleased to say that we’ve had lots and lots of questions asked online already. And so we’re going to get to those. I’m going to group a number of them because as you will understand many of them are around the same issue, but we’ll try and get through as many as we can. With that I’m going to go to the first question and indeed it’s a broad set of questions around the emerging markets. “Do you feel that emerging markets were over promoted by Wall Street investment banks and others in recent years without due regard for the fact that we’re still developing countries?” Is one question. “Many emerging markets appear to be exposed to both demand softening from China and the broad-based commodity priced route. Do those nations have sufficient buffer, adequate reserve levels and exchange rate flexibility or does the IMF expect stronger demand for its financing services?” Finally, one other question: “Can you Madame Lagarde provide more details about this reference to the expansion strengthening of precautionary financing, the global safety net and what would that look like? Would this be a credit line with more or less conditionality?” An interesting group of questions.

MADAME LAGARDE: That’s a whole range of questions, Gerry. First of all, I’m a little cautious with putting all developing and emerging countries into the same group because each and every one of them has its own specificities. Clearly Brazil and Russia are in a particular condition, recession, both of them, while at the same time Mexico is doing fairly well because it adopted quite a few reforms and India is also progressing quite well from that group of emerging countries; then you have all the developing countries which are in a different position as well. So that’s my first point. Each and every one of them is going to be a different case and I think I feel particularly strongly about Africa because a lot of people think Africa at large. Well Africa is more than 50 countries and each and every one of them has its own particularities and its particular economic situation. That’s number one. Number two I think that some of those countries have actually adopted a policy mix which has helped them cushion the various shocks that we are facing in this new economic reality.

If I look at a country like Colombia , for instance: it has taken the right fiscal approach, the right monetary approach, letting the exchange rate float and using it effectively as a buffer. If you look at other countries they have not yet adjusted to the oil shock and they have seen their revenues really dwindle and be reduced significantly. Third, if countries take the right policy decisions and if they have the right mix of more efficient spending -- adjusting the sort of business model to that new reality from a revenue point of view, if they have an exchange rate policy that is sensible and that they can use as a buffer, without pegging unnecessarily and losing a lot of reserve or resorting to some funny, protective rules that are not adequate -- they can actually weather the shock and adjust their models, so that, instead of relying heavily on some revenues from export of oil for instance, they can diversify the economy. Now, having said that, some of them are facing a really difficult set of circumstances and my hunch is that there will be more demand addressed to international and multilateral institutions such as the IMF in order to help both in terms of public finances and in terms of overall balance of payment situation, and we are ready to do that without any stigma associated to the relationship that we have with those members.

Now in terms of financial safety net, we at the IMF have taken the view that the financial safety net is part and parcel of a good international monetary system and needs to be strong and needs to be readily available to face any circumstances either at source, when a country is facing a massive shock which is endogenous, but also at what I would call ‘the receiving end.’ When it’s an exogenous shock and the country is,in a way, the collateral victim of what is happening elsewhere, for instance, on the markets. So we will be working on financial instruments whether they are the existing ones like, the Flexible Credit Line or the Precautionary Liquidity Line, or other types of instruments that will really address the situation of those countries with a degree of conditionality that will depend on their respective situation. But where we can be available to actually give a hand during the shock period.

MR. RICE: Thank you very much. Another related question but broad issue and I’m taking the specific question here, many have asked I’m taking this question. “Madame Lagarde you said recently troubled oil countries keep my up at night. Is there any change or any news that would make you sleep a little bit better?”

MADAME LAGARDE: Well, I think you have to look at any circumstances, any situation, from a threat and an opportunity point of view. I think the great opportunity that the low oil prices have to offer is the fact that subsidies that have historically been paid from state, government revenue to encourage the consumption of oil, particularly in oil producing countries, these subsidies could much more easily be removed and replaced by targeted safety nets that will help the poor people, or will actually unleash fiscal revenue that can be used to encourage education, support health. What would put me back to sleep is the certainty that those countries that benefit in a way from the lower price of oil can actually remove the subsidies that are totally counterproductive and replace them with good and efficient spending of fiscal revenue for the poor, for those that need education, for those that need health.

MR. RICE: Thank you very much. Of course many questions as you might anticipate around China. So again a clutch of questions, let me just ask a few: “What is the IMF’s best- and worst- case scenario for China in 2016?” “How well has China communicated its economic currency and monetary policy so far? And what should they do to improve?” Finally, “how serious is the capital outflow from China right now and what are the main reasons behind it? What can China do to address this issue?”

MADAME LAGARDE: China is going through a massive multi-faceted transition. We do not expect a hard lending of China as has been talked about for many years actually. We believe that if China has a sound macroeconomic framework, if it faces and accepts the reality that it is itself calling for which is of quality and sustainable growth, which will give a lower growth rate than what it has known for a long time and that should be accepted. If it has a monetary policy that is the one that they have recently changed -- the currency variation that has been adopted and it is well communicated and adhered to -- no massive variations, continuation of what has been announced – the qualitative growth on the one hand, the more market-driven determination of exchange rate and more flexible monetary policy and more importantly continuation of the reforms that have been identified by the third Plenum… I’m thinking hear particularly of the state owned enterprises that need to be reformed and some of them probably addressed in their financial equilibrium. So if all of that is done – and, fourth point, well communicated -- because we all need certainly and markets probably more so than anybody else. So if all of that works we don’t see that transition to be a negative overall and we think that China can transition through that period with a degree of difficulties and obstacles and some volatility as well, but it can do so without that hard lending that has been mentioned here and there.

MR. RICE: Thank you. I’m going to turn to India and a couple of questions from that part of the world. Again many questions and I’m just picking a few which I think are representative. “India’s exports have been falling in each of the last 13 months. Its industrial growth has remained tepid in the last few months. GDP growth in the first half of 2015, 2016 has been around 7.2 percent, the IMF however seems to be quite bullish on India, can you explain the IMFs optimism?” And then “with India’s increased quota in the IMF is there any change in the role of India in the IMF that you envisage in the coming months?”

MS. LAGARDE: The IMF is quite bullish about India, and our forecast for 2016, 2017 is 7.5 [percent growth.]So we see India as benefitting, actually it's one of the major beneficiaries of the lower oil prices. When you look at the scale of benefits for particularly the emerging countries, India comes out, you know, way ahead.

We also believe that the monetary policy, the taming of inflation is also going to benefit the very large domestic market of India, and we believe that consumption is going to be one of the key drivers. All of that of course, with the hope and the provision, if I may say, that the trend of reforms identified by Prime Minister Modi, can actually proceed, whether it's in the fiscal area, by way of implementing the goods and services tax, significant reform like the land reform that is considered.

I think those reforms are actually going to be critically important for the unleashing of growth potential that India has to offer. I would add one additional component which we regard as important, and that would be the investment in infrastructure that is so badly needed in many countries, but in India in particular, where there are bottlenecks, both in terms of physical infrastructure, as well as, I would say, administrative infrastructure, and those are key policies to implement.

MR. RICE: Thank you. I'm turning to Latin America, and in particular to Argentina, "Madame Lagarde, what is your view of the ongoing negotiations between the Argentine Government and the debt holders in New York City? Could we see Argentina having access to financial markets shortly and also what are your views on the New Government's economic measures thus far?"

MS. LAGARDE: Well, first on the negotiations, we are very encouraged to see that Argentina, and its new leadership, has taken the initiative to enter into negotiations with Argentina creditors. It's been weighing on the country, and if it results in a fair and balanced outcome, that will be supportive of Argentina returning to the financial markets, and restoring its financial position, it's a real plus.

The macroeconomic policies that are currently identified by the new team and the new authorities in Argentina are very encouraging. And we hope that it will stabilize the Argentinean economy. We hope that, in particular, the determination for transparent data - the state of statistic emergency that has been declared by the Argentinean authorities - all of that is good. And we really support it.

MR. RICE: Thank you. I'm swinging to other parts of the world, we are touching on Central Asia, and Africa, but it's a joint question. That is, "What is the likelihood that Azerbaijan and Nigeria will need IMF loans? Madame Lagarde, you have said that these countries worry you, given their heavy reliance on oil. So, again, what is the prospect of IMF financing?"

MS. LAGARDE: The IMF remains available to all its members, so the moment we are asked to help, we'll do the best we can to help. Both countries, Azerbaijan and Nigeria, have been hard hit by the oil price decline shock, because their economies depended heavily on oil exports, both in terms of trade, and in terms also of revenue. When you lose a lot of that, because the price decline was about 70 percent, then clearly it puts the economy under shock.

Policies adopted by the two are different. Azerbaijan has certainly taken a good fiscal approach, is reassessing spending, is really trying to restore its position, and it's also using the exchange rate as a buffer.

Nigeria is not there, and we certainly hope that in terms of identification of fiscal resources, removal of oil subsidies, an exchange rate policy that is sensible, in the sense that it is not going to waste reserves, we have in particular indicated that a persistent pegging of the naira would not be such a good idea. So, they have to adopt their policies, they have to adopt their model, and if they need IMF's help, we'll be ready to help. No question about that, and no stigma associated with it. They are clearly victim of an external shock, and they have to face a response, which is a national response to that situation.

MR. RICE: Thank you very much. I'm swinging to Europe, and in particular to Ukraine,. The question is, "In the context of recent events in the Ukrainian Government, the Economy Minister quits, accusing some officials of political pressure and corruption. How will the Minister's departure affect Ukraine cooperation with the IMF? Could it be a reason to cancel or postpone the next IMF loan tranches for Ukraine?"

MS. LAGARDE: Well, Minister Abromavicius, while in his position as Minister of the Economy, had conducted some really good and solid reforms, to make sure that direct investment would be welcome in Ukraine, to sanitize the environment to the extent that he could, and I would like to pay tribute to his efforts.

His recently announced resignation is of concern. If the allegations that he makes in his resignations are correct, then it is obviously an indication that the anticorruption measures that were committed to by the Government are not yet working. And there is more progress to be had in that area. We've known that all along. Clearly, the first step was to stabilize the fiscal situation of the country, to make sure that it was not losing its reserves as it did at the time, to adjust the price of energy, and all those steps were taken.

But we have known all along that in relation to corruption a lot of work needs to be done, and it has to be implemented and forced rigorously, because the authorities are accountable, not only for the Ukrainian people, but also to the international community.

MR. RICE: Thank you very much. I'm going to take one more question, and I'm going to stay on Europe actually, it's not an emerging market question, and I'm going to break our own rule, if that’s okay with you. But there are many, many questions on Greece, and I'm going to take on question as representative. Just because of the volume.

"Madame Lagarde, it is reported that the IMF is blocking progress in the discussions in Greece, and insisting on extremely harsh pension reforms. Is this a fair description of what is going on? Also, Madam Lagarde, you met recently with Prime Minister Tsipras in Davos. Can you tell us, is the IMF on the same page about which reforms that Greece needs to do, when it needs to do it, and in order to get the IMF aboard for the Greek Program?"

MS. LAGARDE: Okay. I might repeat a few things, but I will also try to drill down a bit. First of all I have always said that the Greek Program has to walk on two legs. I have always said that the Greek program has to walk on two legs: one is significant reforms and one is debt relief. If the pension [system] cannot be as significantly and substantially reformed as needed, we could need more debt relief on the other side. Equally, no [amount of debt relief] will make the pension system sustainable. For the financing of the pension system, the budget has to pay 10 percent of GDP. This is not sustainable. The average in Europe is 2.5 percent. It all needs to add up, but at the same time the pension system needs to be sustainable in the medium and long term. This requires taking short-term measures that will make it sustainable in the long term.

I really don't like it when we are portrayed as the “draconian, rigorous terrible IMF.” We do not want draconian fiscal measures to apply to Greece, which have already made a lot of sacrifices. We have said that fiscal consolidation should not be excessive, so that the economy could work and eventually expand. But it needs to add up. And the pension system needs to be reformed, the tax collection needs to be improved so that revenue comes in and evasion is stopped. And the debt relief by the other Europeans must accompany that process. We will be very attentive to the sustainability of the reforms, to the fact that it needs to add up, and to walk on two legs. That will be our compass for Greece. But we want that country to succeed at the end of the day, but it has to succeed in real life, not on paper.

MR. RICE: Madame Lagarde, thank you very much indeed for spending this time with us. Let me apologize to colleagues if we did not get to all your questions for today. As I said they were voluminous, and we tried to be representative. I hope you all get a chance to look at Madame Lagarde speech, which she gave just a short time ago, at the University of Maryland, which also refers a number of these topics.

I want to thank you for being online with us today, and look forward to seeing you again, soon. Thanks very much.