Transcript of a press briefing by Gerry Rice, Director, External Relations Department,
International Monetary Fund

Washington, D.C.
Thursday, November 29, 2012

Webcast of the press briefing

MR. RICE: Good morning, everyone, and welcome to this press briefing. On I am Gerry Rice, the Director of the External Relations Department at the Fund.

Let me begin with a few announcements and then I will come to questions in the room as well as questions from our colleagues online. On management travel, Managing Director Christine Lagarde will be in Paris tomorrow to deliver the opening address at a conference organized by the French Finance Ministry. The theme of that conference is “A European Strategy for Growth and Integration with Solidarity.” This event is public and the Managing Director’s address can be followed live on the French Finance Ministry website.

On December 10 to 14, the Managing Director will be in Latin America visiting Colombia and Chile. She will be on Bogota on December 10 to 11 where she will hold discussions with the authorities; there will be a press conference at the conclusion of her visit on Tuesday, December 11. Then in Chile, the Managing Director will first travel to Santiago to meet with the authorities on December 13.

On the same day, she will take part in a student event at the Universidad de Chile also in Santiago, and she will then go to Viña del Mar to participate in the Finance Minister’s meeting of the Community of Latin American and Caribbean States, the so-called CELAC meeting, on December 14. A couple of other items quickly. We will launch the December 2012 issue of “Finance and Development” at noon today. I think most of you have received an embargoed copy already. This issue looks at the world of targeted giving and social entrepreneurship and it’s well worth a look.

Lastly then this week the IMF Executive Board reviewed progress on the implementation of our 2011 Triennial Surveillance Review; directors agreed that the Fund has made good progress in implementing its key surveillance priorities. That progress report and the public information notice, the PIN, will be published and made available to you in the coming days. With that, let me turn to your questions in the room.

QUESTION: We are wondering if the deal with Greece is credible. How do you people see this deal? And given the agreement, will you now make a recommendations report for approval of the first review?

MR. RICE: Thank you. Probably the best thing I can do is refer you to the Managing Director’s statement that we released on Tuesday. I can add that we believe this is a significant and concrete package that can put Greece’s debt back on a sustainable path. As you know, it includes substantial upfront debt reduction measures of 20 percent of GDP and a commitment by Greece’s European partners to bring back Greece’s debt to substantially below 110 percent of GDP by 2022, provided Greece delivers on its policy commitments.

As I said, we have welcomed this, but of course, its success requires that both Greece and the European partners will fully implement their commitments. But again, we see this as a significant and concrete package for Greece. On your second question, again, in our statement on Tuesday the Managing Director said once progress has been made on specifying and delivering on the commitments agreed with the Euro Group, in particular the implementation of debt buybacks, she would be in a position to recommend to our Executive Board the completion of the first review of Greece’s program.

QUESTION: If this buyback regime fails, do you have a plan B? What is going to happen if there is no success on the buyback?

MR. RICE: Again, we welcome the announcement by the Greek authorities that they plan to start the buyback process next week and we look forward to its implementation. I think we should wait for that process to play out and then we will be taking stock.

QUESTION: You mentioned putting Greece on the way back to sustainability of the debt. Does the IMF regard the Greek debt as sustainable at this point?

MR. RICE: The measures in the agreement that emerged on Tuesday include debt buybacks, return of Securities Market Program (SMP) profits from the European Central Bank (ECB), reduction of interest rates, and a significant expansion of maturities. All of this will deliver significant debt reduction to Greece essential for the country to recover, to regain market access, and to get back on the path toward a sustainable debt trajectory.

QUESTION: I am asking about this because my understanding is that without the debt being sustainable, being recognized as sustainable by the IMF, the IMF legally has no right to participate in the rescue package. You are supposed to work on programs that are sustainable.

MR. RICE: As I said, this package once implemented can put Greece back on the sustainable debt trajectory. I will come back to you.

QUESTION: Gerry, can you describe the potential risks to the program that the IMF sees?

MR. RICE: The main challenge now, as I said, is implementation. There were two big tracks of decisions made on Tuesday. One of those tracks was on the Greek side, where the Greek government has made commitments to a set of policies, so implementation on that side is obviously key. Then on the other track is the set of commitments made by the European partners and which are described in the statement, which they issued on Tuesday. Again, I think it’s the implementation of the measures described there that constitute the main challenge going forward.

QUESTION: Good morning, Gerry — is the success of the buyback necessary in order for Greece to receive money?

MR. RICE: What we have said in our statement, and again I would refer you to it, is that we will be looking for implementation of the buyback operation, and contingent on that implementation and the success of the buyback program we will be in a position to put forward the recommendation to our board. QUESTION: Is the Managing Director going to Brussels next week? Number two, what do you hope to accomplish by the December 13 meeting, and can you see that as the last step before you bring this issue to the Executive Board?

QUESTION: The Managing Director will not be in Brussels for the Euro Group meeting next Monday. The Fund of course will be represented and participating in the meeting, but Mme Lagarde herself will not be there. In terms of the next steps, as I said it’s further specifications, delivery on that package of measures that were agreed on Tuesday including the debt buyback operation which we expect to be concluded by December 13.

QUESTION: May I follow-up on Hungary, please? We heard remarks this last week from the central bank governor and the minister in charge of talks with the IMF that pretty much show that it was game over and that they’re moving on and not seeking this program with the Fund. What is your take on those remarks by the central bank? Is the Fund planning on another mission to Hungary? Also, what is happening with the Article IV discussions?

MR. RICE: We continue to exchange views with the authorities though no formal negotiations are taking place at this point. As we stated recently, meaningful progress on program negotiations would require a clear indication from the authorities that they see the IMF — as valuable partners in designing a reform and adjustment process. On the next Article IV, your second question, we are discussing possible dates with the authorities. The last consultation was held in early 2012 and we expect to hold the discussions in early 2013, given that these consultations are an annual obligation of members like Hungary.

MR. RICE There is question online on Argentina from Silvia Pisani of “La Nacion.” She is asking, “Could the December 17 board on Argentina’s statistics be postponed to a later date as reported today?” And she is asking a second question on Argentina. “On the New York court ruling, does the IMF have any comment on the case or on the impact of these kinds of rulings on the markets?” On the second question on the New York court ruling, we are still studying the decision and its implementation. As a general matter, the Fund does not comment on specific court rulings affecting a member. On the other question about Argentina’s statistics and the board discussion, as we said after the meeting in September, that the Managing Director is required to report to the Board by December 17 this year on Argentina’s response to the Fund’s concerns. We do not however yet have a specific date for the Board meeting at this stage.

QUESTION: May I come back to Greece for a second? Is it true that the IMF needs to recognize the Greek debt as sustainable before it can go on with the program? And if so, then does it mean that you cannot have it until that December 13deadline that you just said?

MR. RICE: For programs to go forward, in general, we require financing assurances and an assurance that the country’s debt is on a sustainable trajectory. Again, we believe that if this agreement is implemented as described, then it is the basis to go forward.

QUESTION: And the deadline is December 13?

MR. RICE: I am just repeating what I said earlier. We are looking for specification and further detail on specifying and delivering on the various elements of the package including the debt buyback, and on the debt buyback, we expect to see the result by December 13. QUESTION: Two things. What other details are you expecting? I understand you are expecting the results, but what other sort of details are you waiting for? Second, when you say a successful buyback, does that mean it has to be exactly the number? If it is a little below will it be unsatisfactory to the IMF?

MR. RICE: On your first question, there are a lot of details in the package that require follow-up on and I am not going to go into each specific one, but they are described in our statement and in the Euro Group’s statement. So we will be looking for further detail on a range of issues. On the buyback, we are looking forward to its implementation, it has been announced, and I would not want to speculate further about details.

QUESTION: [No microphone, question is about the challenges for the new Mexican administration] MR. RICE: Thank you and welcome. As you say, we issued the PIN [on Mexico’s 2012 Article IV Consultation] yesterday and perhaps the best thing I can do just pull a couple of lines from that. As you have seen, the Executive Directors have commended the authorities’ — rules based policy framework and skillful macroeconomic management, which have underpinned the strong recovery after the global crisis. They have improved the Mexican economy’s competitiveness and resilience to shocks. And they have bolstered foreign investment and growth. Maybe one other thing from this Article IV that we just issued yesterday. Directors also emphasized that boosting Mexico’s growth potential will require structural reforms to increase productivity and investment. They welcomed the recently approved labor reform and underscored the importance of reforms to improve the quality of education, enhance competition, facilitate access to credit by small and medium sized enterprises, and strengthen domestic security.

QUESTION: I have a quick question about the European Union (EU) Banking Union. That is one of the measures you emphasized that would be important for Europe to return to long-term stability. But there has been a lot of talk that they may not agree to a system by January. I was wondering if you could comment on that and what signal that would send to markets and if that is something you are worried about, and I have a second question.

MR. RICE: We have said on a number of occasions we think that banking union is indeed a high priority in terms of the measures that need to be undertaken at the regional level in Europe. We have been of the view that that is a very important undertaking and the sooner the better. I do not have a comment on specific dates, but the sooner the better.

QUESTION: The second question was about Cyprus. The government said that they are close to reaching a deal in December with European lenders and the IMF and even talk about an interest rate. I was wondering if you could comment on progress and what concerns you see. Thank you.

MR. RICE: You may have seen the joint statement from the E.U., the ECB, and the IMF that we issued last Friday, about productive discussions with the authorities on policy building blocks of the macroeconomic adjustment program. These include policies to strengthen public finances, restore the health of the financial system, and strengthen competitiveness so as to pave the way for the economy to return to sustained growth and financial stability. What I can tell you further is that these discussions are continuing with the authorities and our European partners on financing solutions consistent with debt sustainability. I do not have detail for you on further timing at this stage.

QUESTION: I have a follow-up on Cyprus. When will we see the results of the review of the banking sector? Do you have any idea?

MR. RICE: The preliminary estimate of banking capital needs is expected from PIMCO during the first week of December and these results will be instrumental in determining the financing envelope that would underpin a potential program with Cyprus. The results of the bottom up due diligence exercise are expected to be made public early in 2013.

QUESTION: So we have to wait to next year for the program on Cyprus?

MR. RICE: I do not have a date for you. As I say, we are in discussions. We have had the mission. We are in discussions. There is now this banking due diligence exercise and so we will be taking all that under consideration.

QUESTION: And the last question on Cyprus. Did Cyprus send final proposals? Do you have an idea or can you ask and tell us later?

MR. RICE: I will get back to you on that if we can.

QUESTION: About Italy, a couple of days ago the OECD released a new data forecast somehow alarming on new contraction of GDP and need of new cuts, possibly for next year from the government, new austerity measures. I was wondering if the IMF shared a similar vision that there could be need of further cuts and austerity measure in Italy. And also related, there are going to be elections very soon in Italy and the technical government is going to ride to an end. Does the IMF have any comment on that or any specific concern of new risk coming from this?

MR. RICE: Italy of course has undertaken a wide-ranging reform program, which we think, is headed in the right direction. The Italian government has taken strong measures to stabilize the fiscal situation and initiate structural reforms. And the key is further implementation going down the road. On your second question I would just repeat that it is important now to implement the reforms that have been announced and undertaken by the Italian authorities, so implementation would be the way forward.

QUESTION: — I have a question about Egypt. Is the IMF concerned about the political situation over there and could it put at risk the agreement that was reached about the loan? Thank you.

MR. RICE: I do not have anything beyond the statement we issued the other day on Egypt. Just to refer to that, we said that consideration of the agreement by the IMF Executive Board will require that there is no major change in the economic outlook and implementation plans.

QUESTION: Do you see a major change right now in Egypt?

MR. RICE: What we have said is clear in the press statement that going forward will require no major change in the economic outlook and implementation plan, so I really do not have much beyond that.

QUESTION: The U.S. Treasury this week said that the Chinese renminbi was significantly undervalued. Is that your assessment or what is the IMF’s current assessment on the value of the renminbi, which has strengthened quite significantly?

MR. RICE: The latest assessment we had on China was that the currency was moderately undervalued and that continues to be our assessment.

QUESTION ONLINE: Let me take one more question online before I turn back inside the room. There is another question on Greece, but I think we have covered that. So the next question is on Ukraine, “Is there any decision on whether to continue the standby program or launch a new program? When should we expect a mission? There was information a mission may have on December 6. Is that true?” What I can say on Ukraine is that the authorities have expressed interest in resuming a program relationship with the Fund though the specific modality and conditions have not been discussed yet and we have not received a request from Ukrainian authorities to send a negotiating mission.

QUESTION: [Can you update us] on the economic situation [in Ukraine] in terms of what they need in terms of their financing?

MR. RICE: I do not have much for you beyond our last Article IV consultation, which you can easily find.

QUESTION: While the buyback seems to be a crucial part of the deal — even the creditors do not seem entirely convinced it is going to work. These days there is much criticism that the Euro Group deal does not do enough to address the Greek debt, which remains unbearable under any reasonable scenario. Previously Greece was always the one to blame for the failure of the two programs and now the majority of the analysts blame the creditors for their decisions. What is your response in that criticism?

MR. RICE: I would return to what I already said, that we think that what was agreed on Tuesday is a significant and concrete package and it has significant upfront debt reduction measures. It does reflect a very serious commitment by the European partners on the debt front; the buyback element is one element of those measures, and as I said, we will be looking for the implementation of that and its success in the coming days.

QUESTION: On the question on the sustainability of debt, after three meetings and one all-nighter, you raised from what was 120 percent to slightly more. How did that get arrived at and what is the significance of that number? And is it the view of the Fund that in fact there will be need for much greater right down of Greek official debt?

MR. RICE: What we have said fairly consistently is that it is important that the Greek debt trajectory gets back to a sustainable basis and what was agreed on Tuesday with the 124 percent of GDP by 2020 and then substantially lower than 110 percent by 2022 we think constitutes Greece getting back on that sustainable debt trajectory. Did you have a —

QUESTION: Yes, whether a further official debt write down is in the future needed.

MR. RICE: Again, I think we want to take this one step at a time. This agreement was reached two days ago and it entails significant undertakings by Greece, significant undertakings by the European partners. I think what we want to see now is implementation on both sides and we would take it further from there. Perhaps just to add that I think it was significant what the Euro Group said: “We are committed to providing adequate support to Greece during the life of the program and beyond until it has regained market access provided that Greece fully complies with the requirements and objectives of the adjustment program.” I am going to make this the last question.

QUESTION: A clarification — can you give us a timetable for the Greek issue? For example, if the buyback is successful, the [IMF] Board is going to meet on the 13th or 14, or days after that day?

MR. RICE: I do not have a Board date for you because we have to wait as we said for the success of the implementation of the buyback, make an assessment then, and then go forward to our board in a reasonable manner. I do not have days and dates on that, but let me leave it there. Thanks to all of you in the room and thanks to our friends online. We will see you in a couple of weeks’ time.