IMF Senior Official
Simonetta Nardin, Head of Media Relations, IMF
IMF Official: Thank you for participating in this call. Let me say a
few words of where we stand, and then I'll take your questions.
First, let me focus on the debt. As we have said, there are two legs
to this, on the policies, and on the debt, but I think by now the focus
is squarely on debt, so I will talk about that, but I will be happy to
take any questions you might have on policies.
On debt, I certainly think that we have made progress, Europe is
making progress. Debt relief is firmly on the agenda now. Our European
partners and all the other stakeholders all now recognize that Greece
debt is unsustainable, is highly unsustainable, they accept that debt
relief is needed. They accept the methodology that should be used to
calibrate the necessary debt relief. They accept the objectives in terms
of the gross financing need in the near term and in the long run. They
even accept the time periods, a very long time period, over which this
debt has to be met through 2060. And I think they are also beginning to
accept more realism in the assumption. So I do think that with the
statement, with the meetings last night, we are in the work, in the
proceeding days and weeks, we clearly remain focus in the debt on the
agenda, in a way it's not been before.
On the structure of the deal, that is being worked on, on the
arrangement, if you want to put it like that: We have conceded one
point. In Brussels the IMF was asking that the debt relief had to be
approved upfront before we go to the Board, we had already accepted that
it would not be implemented upfront, we had accepted and supported that
it should be contingent delivery, contingent on Greece meeting targets
during the three-year program. And that it should be fully delivered by
the end of the program period.
So, we have accepted that there will not be -- these debt relief
measures will not be necessarily all adopted upfront, but they will be
implemented as we have always agreed, by the end of the program period,
subject to program implementation. So where we are, by the end of the
program -- where we will be at the end of the program, is where we
always wanted to be. Then we are at a point where we can say, in line
with our standard requirements, Greece has to have a sustainable debt by
the end of the program period, the necessary debt relief will have had
to be delivered by the end of the program period, subject of course to
Greece sticking to the program targets and market access being restored -
nothing has changed there.
But you can then ask, so why are we not going just to the Board now?...
Because as you will see, the Europeans are going ahead and disbursing
now, the IMF is not. The IMF said, it can come in at the end of the year
subject to a debt sustainability analysis that suggests that the
measures that are on the table, and that the Europeans promised to
deliver by the end of the program period, will indeed lead to
sustainability.
Some of the measures that are listed in the statement of the Euro
Group are not quantified, particularly the last one, in the second
bullet, both pockets of these interim measures which really contain most
of the key measures that wanted to note, the very long reprofiling, as
they call it, long grace period, long maturity period, and deferral of
interest.
So, we would need to have quantification in a discussion that assure
us that -- what Europe has in mind under this will deliver the debt
sustainability. Fundamentally, we need to be assured that the universe
of measures that Europe –is willing to commit to is consistent with what
we think is needed to produce debt relief.
We do not yet have that, and that’s why the IMF is not saying
outright, you know, we will go to our Board now. It is a discussion we
need to have. So the good news I think, given what I've seen from the
Europeans, and heard from the Europeans, I think that the probabilities
if you want to do that has significantly improved, and I certainly
expect that we should be able to go to the Board by the end of the year,
based on a positive discussion with our European colleagues on these
debt relief measures.
But we are not in the situation where, as many in Europe had wanted,
where the European disbursement that’s taking place now is being
accompanied by an outright disbursement by the IMF. That that we are not
doing because we still need to have that conversation on debt issues.
I think, as always, there were compromises and I think it was
important to compromise because Greece is in a situation where it needs a
disbursement, so we certainly were willing to concede on some point,
but we have not conceded on the point that we need adequate assurances
regarding debt relief before we go to our Board. And at this stage we do
not fully have these assurances but then we have the commitments that
the Europeans have made, I am hopeful that we will get there.
QUESTIONER: Thanks for doing this. A couple questions. Numerous IMF
officials, including Gerry Rice, said that credibility of the Greek
Program is essential not only for Greece itself, but for all of its
members. By you, the IMF endorsing, putting your imprimatur on this
deal, before you even commit to it, are you not undermining, once again,
the IMF's credibility? Secondly, what's the specifically do you all
need from the Europeans to make an assessment of measures on which new
IMF loans depend? And finally, how can the Fund meet its fully financed
and debt sustainability requirements if the debt relief, which isn't up
front and is contingent, doesn't finally and once resolve the debt
relief? It's contingent, conditional, and not up front.
IMF Official: On the last question: we have always assured that
delivery would take place during the program period subject to Greece
meeting the targets. There's nothing new there. This is where we still
are and it certainly -- if Greece sticks to the program it will get the
debt relief that in our view is needed so that by the end of the program
period we can all conclude that debt is sustainable and Greece should
be able to restore market access. Now if you can say it's contingent --
if Greece doesn't implement the program and doesn't get the debt relief
obviously the debt is not sustainable. But even if Greece gets the debt
relief unconditionally up front, debt will not be sustainable by the end
of the program if policies are not implemented. So in that sense
everything is always contingent. So I don't see any difference here
compared to our normal debt sustainability analysis (DSA).
As far as the sort of endorsement of the IMF, the IMF endorsement is
the approval of the Board. When we say that this is meant to go to our
Board, that is the IMF seal of approval. In the meantime, we are doing
what we have to do, what we agreed to do, and that is help all
stakeholders getting to a point where the IMF can say that this meets
our criteria. The process that's going on, the discussion that's going
on. At Eurogroup yesterday we said is an important step, very important
step forward. And we can support that, but if you read the statement
they also say things that they are explaining why there is no outside
IMF support by having some more conversation on debt. I cannot see how
that in any way has undermined the credibility of the IMF; on the
contrary.
QUESTIONER: A couple of questions. First of all, do you anticipate
the Fund looking to provide exceptional access to Greece? The DSA
suggested that that would be possible. And I mean you mentioned that
you're going to have to see some numbers from the Europeans in terms of
debt relief. I mean can you characterize, you know, what you'd be
looking for in any way for us? I mean, you know, the expectations were
pretty aggressive in the DSA and other documents you were talking about.
Debt holidays up to 2040, you were talking about loan maturity
extensions to 2080. I mean is that still on the order of what you're
looking for?
IMF OFFICIAL: We have not changed our view on how the outlook for
debt is looking. We have not gone back. We want to assure you that we
will not want big primary surpluses. Nothing has changed in our
assumption of the debt sustainability analysis. Clearly, as we go
forward we will continue as we always do to review these assumptions in
light of changing circumstances. I don't see at this stage any reason to
change that. So I would at this stage expect that the debt relief that
would be needed quantitatively in terms of grace period and maturity
date, the term of interest, et cetera, that will be in line with the
debt sustainability analysis that you have seen. But we have agreed to
only adopt these measures at the end of the program period based on debt
sustainability analysis. I said we have agreed that the debt measures
will only be finally approved at the time of the last review of the
program and obviously based on the DSA at that time.
QUESTIONER: And then on exceptional access?
IMF Official: On exceptional access, the way that works is that it
depends on the total outstanding debt of Greece to the IMF. If that is
above a certain threshold we will be on exceptional access, which
requires a stricter criterion for debt sustainability in the sense that
there should be more protection against downside risks, meaning that
there should be a higher probability of meeting these criteria. And
since we are about any program that will be approved right now will
still be under exceptional access. Given the repayments to the IMF we
are set to fall below the exceptional access limit by the end of the
year. However, since the policy is based on what is projected during the
program period, if that means we turn around it could impact in money
that takes us above the exceptional access we will still have to obey to
the strict exceptional access criteria. We will go in to the Board by
the end of the year. I hope this is clear. This is sort of a lot of Fund
speak but I hope this is clear.
QUESTIONER: Thanks very much for holding this call. Just a couple of
follow ups to the last few questions. One, what were the sticking points
last night? What was it in the program or the debt relief measure that
you had laid out in the DSA going into this meeting that the European
side objected to and that you couldn't get agreement on? Was there one
thing or two things in particular?
And the second thing is I'm trying to get around -- just in my head,
what would be different in a DSA later this year? What is the point of a
new DSA? Is it to look at a different set of potential debt relief
measures? Is it to look at them with a different set of assumptions on
growth, on primary surplus? I'm just trying to figure out how that new
DSA would evolve.
IMF Official: The two questions are closely linked. On the first, I
mean there were a number of issues discussed, but clearly a key one was
that our European partners thought that on the basis of the commitments
that they gave in the Eurogroup statement the IMF would conclude that it
doesn't have any concerns about debt sustainability and that we would
be willing to go to our Board here and now. Now, we were unable to do so
and as you see from the statement we are not doing so, we are only
doing that by the end of the year, subject to what we have just
discussed, you know, the DSA assessment of measures.
The key issue here is that the Europeans listed measures in these
three buckets short-term, medium-term, long-term. The ones that really
matters are the short to medium-term inside the program period. The
third bucket is sort of automatic things that are not linked to policies
or future developments in GDP or something like that. Focus on the
first two.
And on the first two, if this is the universe of measures that Europe
has in mind we need to be sure that that is a sufficient universe. And
you will see from the statement that it talks about re-profiling,
deferring payments, et cetera, et cetera, but has no quantification. So
we need to sit down and quantify that and have a conversation with our
European partners whether these measures, if quantified, are sufficient
to restore debt sustainability at the end of the program period. I have
accepted that they don't need to be approved before the end of the
program period, but I'm certainly not going to go to my Board before I
have an understanding with the Europeans what these measures are going
to be. And what this means is I need to understand if these measures are
sufficient. If I cannot quantify it, we cannot quantify these measures
in a way that they allow the DSA to produce a sustainable situation,
then we have to look at additional measures and have a conversation with
the Eurogroup on that.
You can see from this conclusion, or this explanation, we are not in a
situation where the IMF can say we are ready to go ahead, but, given
what we have achieved, given all that work on the European, given what
they commit to, I am hopeful that we will get to that point by the end
of the year, but it remains to be seen.
As far as your questions on the DSA is concerned, I have no reason to
change the assumption that you saw in the DSA that was released on
Monday at this stage. As I said before, if circumstances change, we will
change as always, but I don't see that, and we don't see that. And I
cannot see us facing this on a primary surplus that is above 1.5 [
percent of GDP]. I know it's just not credible in our view. And you will
see that there is nothing in the European statement anymore that says
3.5 should be used for the DSA. So there, too, Europe is moving. We need
to run these measures through our existing DSA, as you see, with these
assumptions and parameters, with the caveat these assumptions and
parameters constantly change.
QUESTIONER: Thank you. Just to clarify, really, a couple, since
you've answered these questions, but first of all can you be more
specific on the targets which you've described multiple times as overly
optimistic? There still seems to be a big gap between 3.5 and 1.5.
Europe has indicated that they are looking at those targets again. Is
that your understanding?
Also, just to make sure that I have this clear, so before the IMF
will -- well, before you will present a program to the Board, you will
know from the Europeans what the debt relief plan is in terms --
specifics on lengthening maturities, fixing interest rates, grace
periods, et cetera. That will be specified, is that right?
IMF Official: Let me clarify -- what we need to do now is that, based
on the world as we see it right now, on the DSA as we see it right now
and this is the one you saw on Monday in terms of the assumption. Based
on that would the measures when they are quantified, that the Europeans
put -- would they be able to produce the necessary debt relief. If that
is clear, we will go to the Board and we don't need more discussion with
the Eurogroup and we will, as I said, we will not require these
measures to be adopted now, but I will be able to tell my Board, you
know, by the end of the program period, based on the new DSA, whatever
certain things evolve, I expect these measures will produce the
necessary debt relief. Now that's what's going on. If we come to the
conclusion that these measures, even when quantified do not produce the
necessary debt relief, there will have to be another Eurogroup meeting
to discuss what to do before we go to our Board.
QUESTIONER: Right, but you're saying that you don't yet have the
specifics as far as exactly what the grace period, the fixed interest --
IMF Official: No. You've seen the Eurogroup statement. It has not been -- some of these measures they'll need to be quantified.
QUESTIONER: Okay. And on the targets?
IMF Official: Oh, you mean for the primary?
QUESTIONER: Yeah, for the primary and other things, which you've
called overly optimistic. Are you still negotiating that down or are you
still waiting for them to revise this?
IMF Official: The IMF needs to be assured that this works based on
our DSA. I cannot take something to the Board that's not based on our
DSA. So I need to be assured that the European measures, based on the
IMF DSA, will produce this relief. And this will be based on the IMF
DSA, what I say to my Board. First I will have a conversation with the
Europeans about the DSA assumption. We always have that, continuously
have that as things evolve and that's clearly understood. Now I don't go
to the Board based on others' DSA, I got to the Board based on our own
DSA developed by the IMF staff. And as I said to you, I see no reason at
this stage to change the assumptions that were listed in the DSA
released last Monday.
QUESTIONER: But are you getting, you know, signals from Europe that
they're willing to adjust their targets? That's really my question. Are
they coming close to what you would consider more realistic?
IMF Official: It's clear from the Eurogroup statement that there is
movement on the part of the Europeans there, right? I mean you don't see
the 3.5 mentioned as the basis for the DSA. But, you know, I don't
expect the Eurogroup statement to list all the IMF assumptions and say
this -- I mean this is their thinking. If they were to go back and say
we're going to have the DSA based on 3.5 from now on and onto forever,
we will not be able to go to our Board. So, you know, I'm not concerned,
this is a discussion we will have. It should be clear to you from this
discussion that I think we have made significant progress, I think the
Europeans have moved in all areas on debt, on assumption, on the
possible debt relief towards what we have concluded. So I think I am
right in saying that I'm hopeful that we will get there by the end of
the year, but I know there is a reason why we are not going to the Board
outright, namely that there is still a conversation to be had.
MS. NARDIN: Thank you all for joining this conference call
