Thursday, May 28, 2015
ON GREECE ONLY
QUESTIONER: Thank you. What is the status of the current negotiations about an agreement [on Greece] taking place at the Brussels Group? Could you please advise us whether it is for the current review alone or is it also about a possible third program? And what would the role of the IMF be in such a program?
- MURRAY: Okay. I think it’s way too early to talk about third programs. We’re focused, as you all know, on concluding the current review. Let me repeat what you’ve probably heard from the Managing Director in the last few days. Talks are continuing with the Greeks, but work still needs to be done. I’m not going to speculate on the timing of any agreement on this ongoing work, but it is intense and we do work to reach an agreement as soon as possible.
A couple other points I want to make relative to Greece today is that the Fund is certainly flexible and open to alternatives, but I have to remind you that what we aim for is the full recovery of the Greek economy so that the country does not find itself in a difficult financial situation again. That’s the goal. The other key point to keep in mind is that the program has to add up, everything has to add up for it to work effectively.
Lastly, and I think this is another point we’ve made a number of times, is that we would need agreement with the Greek authorities and the European partners on a comprehensive set of policies that could help achieve these program goals of stability and growth. We cannot conclude the review based on a few measures. It needs to be comprehensive, and as I mentioned, it needs to add up. Follow-up question?
QUESTIONER: Has Greece requested the bundling of the four upcoming payments into one? What’s the IMF’s position on that? Who makes such a decision, the MD or the board, and is this something common? Has it happened before?
- MURRAY: Thanks for those questions. The short answer is, no, there’s been no request for this bundling which has gotten attention in the media, I think, in the past week. Not specific to Greece, because there has been no request for bundling, but a country, just for background here, for your guidance, countries do have the options of bundling when they have a series of payments in a given month. They have the option of bundling, making a single payment at the end of that month. This is a policy that was adopted back in the 1970s. It is rarely used. I’m only aware of one case and it was back in the mid-80s in which a country bundled payments to the Fund.
QUESTIONER: Do you know which country?
- MURRAY: Yes. My understanding is that it was Zambia.
QUESTIONER: And who makes such a decision?
- MURRAY: It’s a request by the authorities. It’s a notification by the authorities that they’re going to bundle. This policy was adopted by the Executive Board, so if a country says, you know, we have four payments due in the month of June, we’re going to make a payment on June 30, single payment on June 30. They’re quite entitled to do it if they want.
QUESTIONER: The Greek authorities have threatened not to pay the IMF for the next three payments. Are you confident that they will repay the IMF, and what can happen if they don’t? Can Greece be eventually excluded from the IMF, is it something that belong to the range of options?
- MURRAY: Thanks. To say they’ve threatened, that characterization isn’t the case. Our understanding, and Mr. Varoufakis and others have stated that, is that they intend to pay the Fund. So as we stand here right now we expect the Greek authorities will pay us.
QUESTIONER: And what can happen if they don’t?
- MURRAY: For any country that doesn’t meet its commitments to the Fund there’s a process, a very long process over time, but initially the process is they’re declared in arrears and they have no access to IMF financing.
QUESTIONER: So could you walk us through that mechanics? The first payment, when exactly is it due, like what date and what time? And how quickly will the IMF, you know, send a cable to Greece saying you missed this payment?
- MURRAY: I don’t have that granularity in terms of do we send a cable or anything like that. I mean, I think the policy in 1970 on bundling was a result — Telex was widely in use back in the 70s, but I’m not sure about cables right now. It’s basically at close of business on the date of the payment that’s due a country would be declared in arrears.
QUESTIONER: Close of business in Greece or here?
- MURRAY: Here. Yeah, it’d be, you know, midnight. It’s not that hard and fast, but it’s — we give them a day, you know, the day that it’s due.
QUESTIONER: I mean, you just said that they couldn’t have access to IMF financing there if they missed a payment. This is —
- MURRAY: If a country, I’m not being predictive here by any stretch on any country right now, but if a country fails to meet its financial commitment to the Fund, which is a repayment of what’s due, it is declared in arrears and under our policy it no longer has access until it makes good on those arrears. It no longer has access to fresh financing.
Now, you’ve got to remember the Fund is a fund of 188 countries. It’s our fiduciary responsibility. We’re the custodians of the resources of 188 countries that we recycle, we lend to other countries. So that’s why it’s important for countries to repay the Fund because they’re borrowing from 187 other countries. I’m going to move on from this pretty soon. I don’t have too much more to say, but let me go to somebody fresh and then we’ll go ahead.
QUESTIONER: Last time we asked Gerry [Rice, Director of Communications] about this he said that IMF didn’t have a good sense of how much money Greece has, because they hadn’t had technical discussions. Now that technical discussions have been happening for a while, I was wondering if you could provide a more detailed assessment of what’s the situation? I know it’s difficult because of the local — some local cities have money.
- MURRAY: You want me to give you a figure on how much money Greece has?
QUESTIONER: Well, what is the IMF’s assessment?
- MURRAY: Yeah, I don’t have –
QUESTIONER: I’m sure there’s something that you’re working with.
- MURRAY: — I don’t have it.
QUESTIONER: And then a second question which is Mr. [Olivier] Blanchard [IMF chief economist] spoke about the IMF’s analysis of Greek exit from the euro zone in an interview, and I was wondering if you could give some more details about that? And he basically said that it wouldn’t be catastrophic for the euro zone if Greece left. Thank you.
- MURRAY: Okay. First question in terms of Greek liquidity. I don’t have any fresh details on that. Like I said, there are intensive discussions underway in Brussels, that’s where the discussions are underway. Stay tuned on that. Once we have that kind of information, happy to share. We do publish quite a bit on Greece, but I don’t have anything to share with you on Greece government liquidity at the moment.
Okay. In terms of Olivier’s reported remarks I don’t have any reason to quibble with those reported remarks at all, and I can repeat that they’re basically in line with what we have been saying which is regarding the implications. Number one, let me remind everybody that Greece’s exit from the euro zone is not our current baseline. Our baseline remains, and the whole point of economic policy discussion, is the goal of continuing Greece’s active involvement in the euro zone.
But we have explained before, and again, it’s in line with what Olivier is reported to have said, that we do not expect a Grexit to happen given the Greek government has made clear that it wants to stay in the euro zone, and will take the necessary actions to prevent exit. Again, that’s our baseline. However, we do, and we’ve said, that we think that the toll on the Greek economy would be very high if it were to exit. As to the euro area, it could, obviously, have an adverse effect on confidence. The risk should not be underestimated, but the immediate risk of contagion to the euro area will, in the end, depend — and this is a key point — will in the end depend on the response by the European policy makers. And I think Olivier’s remarks were in that context.
QUESTIONER: The first question I have is that the Greek government knows that someday we’re going to have an agreement. And I really need your comment. Do you think that in two or three days, you are going to have an agreement with Greece. And are we talking about agreement with the three institutions, are we talking about agreement with the Europeans only, are we talking about two agreements — one with the Europeans and one with the IMF? Can you explain to us what’s going on there?
- MURRAY: Thanks. Early on I mentioned and explained: we want a comprehensive solution. In terms of timing, I can’t go there. I really don’t have a sense of when an agreement will be reached, but we have made the point that the quicker everyone reaches an agreement, the better off everyone will be, particularly Greece, because the longer it takes to come to and implement policies, the more costly those policies, the economic costs become much greater, so we want a quick and rapid resolution to the challenge. We also want a comprehensive solution because it’s critical for the long run sustainability of economic policy in Greece. Beyond that I really can’t give you much insight.
QUESTIONER: I can’t wait, and then if you want —
- MURRAY: Go; let’s get it out of the way and then —
QUESTIONER: You mentioned our friend, your friend, Varoufakis. He spoke today to the Greek Parliament, and I quote, it’s his quote, “the institutions that are characterized by the inability to feel pain while the (inaudible) to the IMF, he said, cold, the Fund has a very dark history which resulted in a lack of credibility in mid-2000. I don’t know if you have a comment, but I just read exactly what he said.
- MURRAY: Got it, thanks. I’m not familiar with, specifically those remarks, but you know, let me make the point as I said earlier, that we are — we made it clear to the Greeks and to everyone that we’re flexible, that we’re open to hearing alternatives and we want a quick and rapid resolution to the situation.
What I’m going to — I’ve got a number of questions on Argentina, Egypt, Nepal — I want to get to those in a second, so let me make this, if I can, the last one on Greece.
QUESTIONER: Can you give us more details about the discussions that the MD is having with Secretary Lew on the phone, the last days on Greece of course, and on the G7 in the last hours?
- MURRAY: I don’t have a read out on that conversation or any details on conversations. You know Secretary Lew and Managing Director are both in Dresden at the G7 meeting, so, and from what I can tell, Greece is a prominent topic at that meeting in Germany, but beyond that, I don’t have anything to offer.
QUESTIONER: A number of institutions including the Bank of England started to assess the risk proposed by the Brexit, you know, the UK exiting the [European Union]. What’s your assessment here at the IMF of this scenario? What risk could it pose to the economic situation in Europe?
- MURRAY: Right. Well, I’m not going to be specific beyond what I said earlier, which is, you know, it’s something that bears watching, but our current baseline is that Greece remains in the euro zone.
QUESTIONER: Greece, but at — Brexit.
- MURRAY: Oh, Brexit. Excuse me. I apologize. I got Greece on my brain. Brexit. As far as Brexit goes, I don’t have nothing — Britain’s exit from the euro zone, I have nothing for you on that. I have absolutely zero guidance, sorry. I apologize for the — my hearing is going.
QUESTIONER: Bill, do you have anything, we forgot Cyprus. Do you have anything with Cyprus because I think you have a success story there? And also I see a report now saying that the IMF is threatening to leave the Troika of institutions if there is no mention in your agreement of restructuring of Greek debt. Can you tell us your position on the restructuring of the Greek debt?
- MURRAY: On Cyprus, I don’t have anything immediate for, well I’ll take it back there, I don’t any guidance on Cyprus. Of course, Cyprus is doing well and we are very happy about that.
QUESTIONER: But how are you (inaudible) going to give us later?
- MURRAY: Yeah. Let’s – the press office will come back to you.
QUESTIONER: And then the restructuring stories, I’d like to hear your —
- MURRAY: You know, there are a lot of stories floating around that I’m not going to feed, and that’s one of them.
QUESTIONER: I’m not asking about a story, I’m asking about your position on the restructuring of Greek debt if it’s possible.
- MURRAY: We haven’t done debt sustainability analysis yet, but there’s a debt framework in place, and we expect it to remain in place, full stop. What levels of debt, and when we get there, that’s going to be subject to the next debt sustainability analysis, but that’s where we stand.
I’m going to take one more question from the screen, and I think we’ve got a — I’m going to come back to you.
QUESTIONER: I just wanted to follow up on what my colleague was saying. You talk about flexibility with Greece, there’s debt repayments coming up in June, so that’s not flexible, so just in the broad sense, what is flexible?
- MURRAY: Sure. Now I don’t understand your question. I mean, look at the program, based on economic targets, and goals. Now the main goal doesn’t change, that’s sort of inflexible, restoring Greece to sustainability. That’s inflexible. We want to see Greece return to economic sustainability.
So to get there, there’s various ways you can get there. Situations evolve, and that’s what we look at, but, it’s the Greek authorities putting proposal on the table, and making sure they add up. Add to the ultimate goal, which is sustainability, that’s it.
QUESTION: Can I?
- MURRAY: So I — you know, I — Go ahead and ask, and then I’m going to take a questions online. Okay.
QUESTIONER: Thank you. Would you be willing to reexamine the goal of debt to GDP ratio?
- MURRAY: You know, I’m not going to get into the specifics on debt levels and things of that nature, we have to do further analysis on that before we are even going to touch that one. But, you know, I’ll keep coming back to it.