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Sunday, February 12, 2017

Greek Economy - A possible participation by the IMF in a program, we have said repeatedly publicly that our strong preference is for a primary surplus target of 1.5 percent and that this should be accompanied by significant debt relief.. - Gerry Rice - IMF

Publication - Transcript - IMF Press Briefing

QUESTIONER: Gerry, I have a long question. I don’t do that often as you know. I’m sure you know that Mr. Regling in an article published today in the Financial Times argues that, and I quote, “If the agreed reform program is fully implemented, debt sustainability is within reach.” He also asked a question on the debt sustainability, namely why does the IMF come to a different conclusion? He gives the following answer: “The Fund has so far not been able to integrate into its analysis of Greece fundamental factors that set a member of the eurozone apart from other countries in the world.” What is your answer?

MR. RICE: Let me take a few questions on Greece, as I imagine there might be more.

QUESTIONER: Given all these statements coming out from Europe, I can't really understand what Poul Thomsen meant when he said that the gap between the IMF and the Europeans is closing regarding the debt and the fiscal targets. And also I have another one: How easy will it be for Poul Thomsen to go to the Board with a proposal that includes fiscal targets of 3.5 for the period after 18, when most of the Executive Directors agreed that the preferred target is much lower and that Greece does not need additional fiscal consolidation at this time?

QUESTIONER: I want to ask you if Mr. Thomsen traveled to Berlin last week. There were many reports that he went to Berlin and met with Mr. Schaeuble. There are reports in Europe saying that they even agreed on how to handle the debt issue. Kindly tell us if they met and if they discussed Greece.

QUESTIONER: German Finance Minister Schaeuble just said today that he was ruling out any debt reduction for Greece, saying that it was forbidden by the EU Treaty actually. So I was wondering, it seems that you are increasingly at odds with your European partners, and how can we expect to find an agreement on remedies while you don't seem to agree actually on the diagnosis?

MR. RICE: Anything more on Greece? There is one more on line from CNN Greece, who is asking: Executive Directors at the IMF looked forward to discussing the operational framework for Fund collaboration with monetary unions. When do you expect to have this discussion and why is this issue raised now?

So let me try and take that clutch of questions. For those who have not been following Greece quite so closely as colleagues here in the room, the IMF actually did a lot of communicating this week on Greece. We had a meeting of the Board earlier this week on Monday on the Article IV Consultation, which is our annual checkup on our membership and economic conditions facing them, and also discussed was what we call an ex-post evaluation, a look back at the previous program. In the usual way with the Fund we published all these documents. They're available to you on the website. So with that, let me try and take some of these questions.

Perhaps I should caveat by just noting that the Board discussion on Monday was not about the program or the IMF participation or potential participation in a program, it was more a look at the overall economic conditions facing Greece in the context of our Article IV. But in terms of possible participation by the IMF in a program, we have said repeatedly publicly that our strong preference is for a primary surplus target of 1.5 percent and that this should be accompanied by significant debt relief. We've referred to this as the two legs of the program that we think are required. We have also said that we think this target of 1.5 percent can be attained by the policies envisaged in the current European Stability Mechanism program. In short, the IMF is not asking for anymore austerity in Greece. That's the baseline of the IMF’s staff position. I know we've said it here before.

We have also said before that if it is at the end of the day the firm desire of the Greek authorities and the European authorities to go with the 3.5 percent primary surplus, we believe that such higher level of primary surplus is sustainable, but for a limited number of years, and only if underpinned by high-quality structural reforms and by growth-friendly measures. We can talk a bit more about what that actually means, if you like. Although, I think it’s been explained in great detail by Poul Thomsen and others. But, again, our strongly desired preference is for the 1.5 percent. And if you look at the summing up of the Board that was issued on Monday, clearly that’s the desired preference of most Executive Directors as well. That’s very clear.

A couple of other things, maybe I can just deal with them quickly. Poul Thomsen was in Berlin for a staff visit. I can confirm that. He did have meetings with the authorities. I don’t have information as to whether he met with Minister Schaeuble or not. But he was in Berlin and met with the authorities.

I haven’t seen the statement you referred to from Minister Schaeuble in the press, so I won’t comment on that. However, it sounds to me like a very consistent statement with what Minister Schaeuble has said before. It doesn’t sound like something new to me. He has said consistently that a debt haircut is not possible. But there’s debt relief and there’s debt haircut. Again, I haven’t seen the statement, so I’m not commenting on that. But it sounds to me like it’s a perfectly consistent statement.

You asked how can we say the gap is closing in terms of the different views on Greece. I think if you take a seven years’ view, which is going back to 2010, and you look at the course of discussions and the issues, I think you can see that there’s more agreement, more consensus around certain issues in terms of reforms. Even in terms of the broad issue of debt relief, if you look back a few years ago, I think you could well argue that there’s been a closing of the gap. There are still differences, clearly, but I think you can argue that there’s been more of a coalition around some of the core issues.

And that brings me then to the final question and it’s the first question you asked about the statement by Mr. Regling this morning in the press. I’ll say a couple of things on that. Number one, again, we issued a lot of information on Greece this week. Included in that information was our debt sustainability analysis, so we stand by that debt sustainability analysis. And most of the Executive Directors are on the record as supporting it too. But on the statement from this morning: I think we would agree that Europe has provided extraordinary support to Greece, and we would agree that it’s encouraging that Europe indicates and reiterates again that it will stand by Greece. We, obviously, welcome both of those things. But I think it’s important to say that this support is not unconditional. It depends on commitments to reforms. It depends on implementation of reforms. It depends on targets being met. And I would add that we have seen twice in the past years, in 2012 and 2015, that Greece has faced a crisis precisely because targets had not been met and Europe withheld support. And on those two occasions it led to the talk of Grexit and crisis and all of that.

So, again, the support is not unconditional, and we’ve seen that in the past. And that brings us to the IMF communication this week: It’s important that targets be realistic. And you saw the sense of that in the summing up of the Executive Directors this week: that targets should be realistic. I think that’s what the IMF is proposing.

QUESTIONER: Just to clarify two things. One, the Board did discuss, as part of the ex-post review of the second program, any potential future financial agreements with Greece that the Fund could consider. So in that sense the Fund did discuss potential engagement, not on a specific program, but just generally speaking. Just a note on that.

But you said, as we’ve heard before, that there’s two legs to the program. There’s the reforms and then there’s the debt relief, and the reforms should be accompanied by debt relief. It’s the word you used: accompany. Now, if I’m taking my wife on a date and I say she’s accompanying me. If I’m making reservations I mean that she’s actually coming with me at the same time. I do not mean that I’m going to arrive first and that she will come an hour, two hours later.

I wonder if you can clarify what you mean by “accompany”? Do you mean “at the exact same time” or do you mean something more -- something that would estrange me with my wife?

MR. RICE: I would never say anything to estrange you from your wife, I hope you know that. I don’t want to pars words, but let me then say -- instead of accompanied -- complemented by debt relief. I don’t think we should get too overly worried about words. We’ve said for a long time: it’s the two legs of the program. We need the economic reforms, complemented by significant debt relief. I’d leave it there.

QUESTIONER: But to be clear, in this sense we’re not parsing, because there is, clearly, an onus on Athens to deliver, right? And you are also providing an onus on Germany and the rest of Europe to deliver? The sequencing is critical here, in terms of political feasibility, which is a key component of any program. So in terms of sequencing, is the IMF asking for that accompanying or complementary debt relief at the same time that Greece approves these reforms or at a later date?

MR. RICE: Again, I’m not going to parse words. And I think it’s a matter for the discussions and negotiations as to what the precise sequencing of reforms and financing and debt relief might be. That’s always the case with IMF programs. So I wouldn’t read too much into parsing specific words.

There was one question I didn’t answer about monetary union from our friends at CNN Greece. And the reference there is to the last line of that summing up from the Executive Directors where it says: “Directors look forward to discussing the operational framework for Fund collaboration with monetary unions.” This is not a new issue. This statement from the Executive Directors was in the context of their comments on that ex-post evaluation that I mentioned. It’s actually in the work program and the discussion is scheduled for later this year.

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