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Transcript of the Press Briefing with Gerry Rice

July 14, 2016

MR. RICE: Good morning, everyone and welcome to this briefing on behalf of the International Monetary Fund. I'm Gerry Rice of the Communications Department.

And as usually this morning we'll be embargoed until 10:30 a.m., that’s Washington, D.C. Time. Let me begin with a few announcements and then I'll come to our colleagues in the room, and I see we have some colleagues online also.

Briefly, this morning, some management events: the Managing Director Christine Lagarde will be speaking this afternoon in Washington at the Center for Global Development. That will be at 2:00 p.m., and she will be speaking on the issue of the challenges facing the low-income developing countries, and this will be followed by a conversation with the Center's President, Nancy Birdsall, and then there will be a Q&A with the audience. It's open to the media. We will be webcasting it, and you are welcome.

Then next week, on Monday, at noon, that’s July 18, Christine Lagarde will be at the U.S. Federal Reserve in New York, and there, she will be speaking on the issue of correspondent banking relationships. You know, sometimes referred to as that whole issue of de-risking, but putting it properly, it's the correspondent banking relationship area, and potential disruptions in that area. That’s going to be at the U.S. Fed, as I said, next Monday. And, again, open to the press, it will be a live broadcast. In fact, it will be moderated by Bloomberg, okay, and there will be a Q&A with Tom, after the event. So that’s Monday the 18th.

Tuesday the 19th, the much anticipated world economic outlook update will be issued by our Economic Counselor and Director of the Research Department, Maury Obstfeld. That’s going to be at 9:00 a.m. here in Washington. We'll have a press conference for you, and we'll be releasing that update. We'll get that to you in the usual way, under embargo, and then have the press briefing, that’s Tuesday, the 19th.

I can also tell you that David Lipton, our First Deputy Managing Director, will be in South Africa early next week for various meetings with the authorities and other stakeholders. He'll give a speech. We'll get that to you and all the other media arrangements ahead of time.

And then later in the week, the Managing Director and David Lipton will be in Chengdu, China. And that’s to take part in the G20 Finance Ministers and Central Bank Governors Meeting, on July 22nd to 24th. And ahead of that, in the usual way, we will publish the G20 Surveillance Note, and make that available to you also.

So, I know some of you here are going to Chengdu, and we will make sure you get those materials in advance and try to be as helpful as we can to you. Let me turn to your questions in the room if there are any.

Good morning, Andrew?

QUESTIONER: Thanks as always. I just wanted to, I guess get it out of the way quickly. My question is on Ukraine. Do we still have a chance to see a Board Meeting on Ukraine before the end of July as promised? What may be the expected result of that meeting? And when I was looking at my notes here, I realized we haven't mentioned the issue of the Russian debt for a while. So, do you know anything about any progress on the Russian debt issue, in the context of the problem? Thank you.

MR. RICE: Yes. Thank you, Andrew. You know, I think it's possible that the Board will consider the next review, it could still be in July, or if it takes some more time, it would be after the Board's recess which is coming up. But Board consideration could still be in July, the discussions are very close to being finalized and you know, there are some technical issues that we expect to be resolved soon.

On the debt, no material change from what I've communicated here before, Andrew. And of course it will be part of the Board's consideration, one of the aspects that will be considered by the Board when that discussion takes place.

QUESTIONER: Good morning.

MR. RICE: Good morning, and welcome.

QUESTIONER: Thank you. I also have a question on Ukraine. This is the last week of work of Ukraine and parliamentarians still have not adopted the laws agreed earlier with IMF Mission. So including like tax and custom codes that we are agreed, so will it influence the decision of IMF of giving tranche, and if they start work on 6thof September. Thank you.

MR. RICE: What I can tell you is, there is no further legislation pending that is a condition for this review. Okay? But there are of course, a number of laws that are to be adopted or amended over the next several months that are important for the overall success of the program. Okay? On Ukraine, yes.

QUESTIONER: Can I just clarify that the tranche that’s being considered is just one review, it's not rolling two together, and secondly, if the Board were to consider after the recess, I'd assume that would be late August, early September. Doesn’t that indicate that will likely be the last tranche of the year?

MR. RICE: I don’t have a take for you on, you know, the expectations of the tranches sequence and so on. On your first question, my understanding is that indeed it's the one review that would be for consideration at the Board, not rolled into two.

QUESTIONER: And given that often in other programs like the Greek program you have rolled them together, what goes into the decision not to put them together, versus just keeping one?

MR. RICE: I mean it's many things. It's, you know, the rate of progress on reform. It's the financing gap. You know, it's a number of considerations, I wouldn’t put it down to any one item. Good morning, Jeremy.

QUESTIONER: Good morning. I have a question on the U.K., where the new government is being formed there. And I was wondering, what would be the IMF recommendations, on two fronts, the first one would be: do you think that the government should ease the pace fiscal consolidation? And second of all, do you think that the government also should refrain from allowing its corporate tax as the previous government committed to do?

MR. RICE: So, on the U.K. and of course the Brexit issue, it continues to be an unfolding event, obviously we'll have a bit more to say on it next Tuesday, in the context of the WEO update. Still a good deal of uncertainty surrounding the whole issue. On your specific questions, Jeremy, what we have said in the recent Article IV, on the U.K., is that fiscal policy would need to respond flexibly to changing circumstances. In the near term this means allowing the automatic stabilizers to operate freely, as the government is doing. And, you know, the government has also said that it will reassess the fiscal path in the context of its next regular review, referred to in the UK as the Autumn Statement, at which time the broad direction of the negotiations between the UK and the EU and the economic effects should be a bit clearer, we would hope.

QUESTIONER: And on the corporate tax?

MR. RICE: On the corporate tax, I think we commented on this recently that, I think we need to wait and see the specific details of the proposal in the UK context. But in general, our concern is that sometimes this can lead to what is being referred to as a race to the bottom with competitive corporate tax regimes between different countries and an escalation of that, which at the end of the day doesn't benefit anyone.

David?

QUESTIONER: Hi, thanks. I was just wondering if you could look ahead a bit to the G-20 and talk about what the IMF priorities are going to be. It is to be mostly focused on promoting more growth in the global economy? Will this be a good forum for discussing, say, the issue of industrial overcapacity, which has, you know, certainly been focused on China but is a problem everywhere?

MR. RICE: I think you've hit the nail on the head in terms of I think the main topic for everyone at the G-20 will be the state of the global economy growth, more sustainable, more inclusive. Increased growth, I think that's going to be probably the main topic for discussion. And, looking at the agenda, we certainly see there are items allocated along those lines. The other issues that we can see from the agenda and we can expect to be discussed I think are around financial sector reform that continues to be an issue of global importance. The whole issue of international tax and you know there is a G-20 high level symposium in Hangzhou on this issue.

Related to your question, the second part of your question, yes I think we'll see discussions on investment and infrastructure. The G-20 has been focusing on that issue as you know for some time. So I think that's going to be the clutch of issues that will be discussed around the agenda.

QUESTIONER: How has BREXIT changed the agenda? Has it influenced, does it accelerate the growth issue for the G-20 members?

MR. RICE: You know we have said on BREXIT -- and I said it here a couple of weeks ago, that it's an unfolding event that gives rise to a great deal of uncertainty. We think it will have a negative effect on growth for the UK and for the European Union, and more broadly, potentially, for the global economy. So that's where we've been coming. So I would imagine that this would be a topic that will be a focal point at the G-20 as well.

And again, as I said here the last time, decisive policies can make the difference. So hopefully that's something we would also expect the G-20 to be seized off.

Are we on G-20? Are we moving on? If we're moving on, I'll go to Katerina.

QUESTIONER: Thank you, Gerry. Katerina Sokou with Greek Daily Kathimerini. When is the independent evaluation report on the IMF and the Eurozone crisis going to be discussed at the board? And when is it going to be published? I'm asking, there was a Sunday newspaper front page headline in Greece that it is recommended to management not to lend Eurozone countries anymore. Could this ever be in question given the Eurozone countries are important members of the IMF?

Thanks.

MR. RICE: Yes. A couple of things. There is a report by our Independent Evaluation Office, the IEO on the Eurozone programs, you know, the 2010-2011 set of programs, so it's not an assessment of today's program, it's backward looking to the previous programs for Greece, for Portugal, and for Ireland. So that's going to be discussed I can tell you next week at the board July -- I believe it's July 19.

I don't have the publication date because, as I think you know, there's a board discussion obviously and there will be a board summing up, as we call it here the summary of the board's views, and that will be attached to what we call -- again, sorry to use our jargon -- the bundle of documents that we will then -- well, you know this, you follow us -- we will then publish that package, that bundle of documents as soon as we can. So I don't have a date for you on publication, but I've given you the scheduled board date for the discussion.

I don't have anything on the conclusions of the IEO report obviously. And let me stress that the IEO is an independent function within the IMF, it's distinct from staff. It's an important part, a crucial part actually of our whole accountability and transparency and, you know, self assessment in many ways, but it's independent, it's the Independent Evaluation Office. So I don't know what the specific conclusions will be, I don't have that for you today. But we will of course make these public as we always do and that package that I talked about will include as I mentioned, the board views from the discussion. It will also include the view of management on the report, and of course and fundamentally, the IEO's own views. And we will release everything in a very transparent and public way.

On Greece, I would just echo what I said here a couple of weeks ago, that we are part of the discussions, we're fully engaged to be able to support Greece not only with policy advice but also with financing. You know, we need certain things to be in place and I'll just repeat them again. We need the policy reforms to be on track on the Greek side, and we need the DSA, the Debt Sustainability Analysis, to show that the debt is sustainable. And that means that the debt relief measures from European partners would be consistent with that. I don't have a further update from two weeks on progress on that issue, but that's where we are.

QUESTIONER: Are you aware of the Bank of Greece recommendations of a primary surplus of two percent from 2019 onwards and have you studied that and do you have any comment on it?

Thank you.

MR. RICE. I don't. I haven't seen that, Katerina. Are we on Greece?

Good morning, Mike.

QUESTIONER: Gerry, Mrs. Lagarde spoke to the Financial Timesand she said, and I quote, that "The Greek program, it has not been a successful experience, let's face it, for anyone, particularly for the Greek people themselves". She also said, and I quote, that "The IMF has been a scapegoat in Greece".

My question is a scapegoat for what? For the failure of the Greek program? And also is the IMF comfortable with the Greek people being scapegoated for the failure of this program? And again do you believe that the IMF has a share of responsibility for the fact that the Greek program not evolved into a successful case?

MR. RICE: Michael, I just want to clarify one thing and I'll answer your question more broadly: no one, at the IMF at least, was scapegoating the Greek people, okay?

QUESTIONER: Yes.

MR. RICE: Did you just say that?

QUESTIONER: I asked…

MR. RICE: Well, that's not true and that's not the case. Let me be very, very clear, okay, that's not what Madame Lagarde said and that's not what anyone at the IMF has said.

On your broader question, look, I think it's clear that the Greek economy is not where anyone would want it to be in the sense of growth and employment and many other indicators. So I think that's just being realistic. I think that would be true for the Greek government, for the European partners, for the IMF, and for the Greek people. It's not where we would want it to be. And that's where we continue to work and work together to try and, you know, have a program that can take the Greek economy where we would want it to be, which is a much more sustainable and economically healthy place. And we very much remain committed to that.

I think it's, you know, on the whole issue of success, which may not be the best word. I think effective is a better word in a sense the Greek program has been a bit of an exception in that respect because if you look at the other programs in Europe, and I mean specifically Ireland, Portugal, Latvia, Iceland, Cyprus, if you look at these other programs, I think they have been much more effective. And so again, just on this whole relativity of success and so on.

And I think in terms of why the Greek program has not been more effective, there are a lot of complex reasons behind that we have discussed here and discussed elsewhere, and will be discussed again in the context of the IEO report I'm sure. But there are many complex reasons why that is the case and, you know, we can talk about that a bit more.

Did you have something else?

QUESTIONER: (inaudible)

MR. RICE: Yeah, why don't we take it now?

QUESTIONER: The Greek labor minister made some comments yesterday, they are not very good comments about the IMF. First of all, he said that he's optimistic about the outcome of the second review. As you know, they are going to talk about labor. But he said that he is not going to accept anything. And also he said that the IMF will be isolated and will lose. You want to give him an answer?

MR. RICE: No. I haven't seen those comments so I'm not giving an answer. But, you know, we talked about it two weeks ago, Michael, a little bit, the labor market legislation. You know, I don't have much more beyond what I said at that time: that the labor market review is ongoing and we expect on this basis additional reforms will be defined and discussed in the context of the second review. And the whole idea is to bring the labor market practices in Greece that framework in line with international best practice. That's the whole idea.

Andrew, good morning.

QUESTIONER: Good morning. Andrew Mayeda with Bloomberg. Question for you on Zimbabwe. I understand that Zimbabwe was to have repaid $1.8 billion in arrears to the fund and I believe that was due last month. We have comments from the authorities in Zimbabwe implying that that has not been paid and perhaps won't be forthcoming anytime in the near future. Can you provide an update on that?

MR. RICE: Thank you. Zimbabwe continues to be in arrears to the Fund. You know, I'm glad you asked the question actually because there has been quite a bit of reporting on Zimbabwe recently that I'm sure you've seen, and, in fact, some misreporting on Zimbabwe, so let me try and clarify just a bit.

I mean the first thing I'd say is there's no financing program under discussion with Zimbabwe at this point. However, the authorities have announced a plan to clear their arrears with the Fund and with other international institutions as part of their reengagement with the international community. So the way this would work is that once the arrears are cleared and, again, they have not been, but once the arrears are cleared and our board would approve the normalization of relations with Zimbabwe, any request from the authorities for financing would then be considered.

And again, as is normal for the Fund and would be true also in this case, we need a couple of things to be in place before even that consideration can take place, which is one, design of some economic policies to ensure that the structural imbalances are meaningfully addressed, and, two, obtaining financing assurances regarding Zimbabwe's ability to service and sustain its debt.

So I think what I'd say on this is that irrespective of the calendar for arrears clearance, the economy needs immediate reforms to address the vulnerabilities that have come to the fore. We think expeditious implementation of those reforms is critical to reverse Zimbabwe's economic decline and in the process of course protect the most vulnerable segments of the population. We stand ready to help with that implementation as usual.

QUESTIONER: Could I just follow up quickly? I was just going to ask, as the Fund considers whether to normalize relations, to what extent does the Fund consider issues like human rights and governance? I mean this regime doesn't exactly have the most sterling record in that regard. You know, there are lots of questions about the trustworthiness of that regime. To what extent does the Fund take that into consideration?

MR. RICE: Again, I hope I was clear, we are far from a program deal with Zimbabwe. I hope I was clear on that.

In terms of what would need to be taken into account, it's those things that I just mentioned, Andrew. Of course governance, accountability, transparency, are all also issues that would be taken under consideration were we are in a position to move forward with any kind of program. And under that rubric, I think falls how, as I mentioned, vulnerable groups and others are benefitting from the economic policies that are in play.

Are we on Zimbabwe, Ian? So we're moving on, right? Okay.

QUESTIONER: Good morning. The finance ministers of the EU announced sanctions on Spain and Portugal for violating rules and budget deficit targets. So how do you see, how does IMF see those sanctions on Portugal and which implications it might have for this country? OECD said the sanctions on both countries were the last thing Europe needed after Brexit, so I just wanted to have some comments from you on this.

It seems you have an update on Guinea-Bissau if you could give some considerations in case you do? There was a remaining installment of €9 million to be paid this year. In case you got any information?

And on Mozambique, it has been on the news that the financial aid by the IMF might not happen this year, and I would like to confirm that with you. In Angola, I just wanted to ask, in case you have some follow up…

MR. RICE: A whole press conference in itself. Well, thank you. Let me try and give you something on each of those. On Portugal, look, on the issue of sanctions, that’s clearly for the European Commission to propose sanctions if that’s what they do. My understanding is, that would happen within the next 20 days or so, so that’s not an issue for the IMF. It’s for the Commission, so you might want to ask them about that.

On Guinea-Bissau, thanks for the question, seriously. It’s good to talk about other countries about important issues. What I can tell you is the IMF’s Extended Credit Facility program with Guinea-Bissau is off track as a result of two expansive bank bail-outs that violate the end December 2015 net credit to government performance criteria.

This also prompted development partners, including the World Bank, the African Development Bank, and the EU to hold their budget support. I can tell you that in an effort to bring the program back on track, the new government which, as you know, has been in place since last month, declared the bail-outs to be null and void, and, you know, we continue in that context to provide policy advice and technical assistance, and continue the discussions with the new government.

On Angola, we talked a bit about it two weeks ago in your absence, but I think it’s been reported that the government of Angola has decided to continue their close policy dialogue with the Fund only in the context of the Article IV consultation, and not through discussions concerning an EFF supported program. So, again, we continue to work. We stay engaged, but it’s not on discussions on a financial program.

Then on Mozambique, again, we’ve discussed it quite a bit here. We had a mission in Maputo ending toward the end of June. That was the fact finding process related to the previously undisclosed borrowing, and to assess the macroeconomic situation. We welcomed the government’s investigation into this previously undisclosed debt. We thought that was important.

Additionally, the staff mission said that further measures are needed. In particular, we felt that an international and independent audit would be needed. That’s of Ematum, Proindicus, and MAM companies. The latter two being the companies that received the funding under the previously undisclosed loans. We did issue a press statement on all of this, so it’s all public.

Our understanding is at this stage the government is not ready to move forward with the audit. That’s kind of where we stand. So the review with the Fund has not been completed, and, of course, for any disbursement that review would need to be completed.

QUESTIONER: On Portugal you’re telling me you don’t have any comments on the sanctions? Because if just released, the Article IV June 30 --

MR. RICE: We did. That’s right.

QUESTIONER: -- so how do you see those sanctions? No comments on that? Aren’t you worried?

MR. RICE: We just released the Article IV consultation report a few days ago on Portugal, so I’m going to let that speak for itself. It was pretty comprehensively covered and I’ll leave it there.

Ian? Then I’m going to go online for just a bit.

QUESTIONER: Sure. Ian Talley, Wall Street Journal. Two questions. On the new relationship between the UK and Europe. I understand you’ll say that it is a political decision that’s up to the two countries. But, in terms of economics, what would the IMF recommend? A Norway model that would mean highly integrated without the formal EU ties or something else? Is there something you can give me on that?

Secondly, U.S. bond yields are at record lows or have been touching record lows. The yield curve is extremely compressed. There is something like 13 trillion or 12 trillion in negative yields in sovereign debt. Globally, how concerned is the IMF that investors may be getting the growth forecast and central bank rating expectations wrong? And we could see some financial turmoil ensue.

MR. RICE: On your first question, Ian, on the Brexit issue. You know, what we have said is, as you anticipated, that it’s for the UK and European Union to work out the details of any agreement governing the exit arrangement.

What we’ve said is that we would like that to happen as soon as possible. If it can be done in a prudent and helpful way. We have urged collaboration in that process. You know, when I was here two weeks’ ago, I said that that we would like the agreement to be as speedy as possible. But, again, with those caveats that we’d also like it to be prudent, and, obviously, acceptable to all parties. That would be optimal.

On the other hand, rushing to some kind of an agreement, rushing to a bad outcome would not be our preferred option. But, again, it’s for the EU and the UK to work out the details.

On your broader commentary of investor expectations, you know, I don’t really have any advice for investors in terms of how they should be reading it. I think we will be, as I mentioned, coming with the WEO update on Tuesday, and I think we’ll have a clear message around how we see the global economy and these various related issues at that point.

Okay. I’m going to make these the last in the room and then I want to take a couple online. Maybe what I’ll do is take a couple online, and then I’ll come in the room. Question on Jordan and Lebanon, and other formerly middle income countries with refugee issues. The World Bank has reportedly shown flexibility. Is the IMF still banning those countries from concessionary financing? That’s a question from Matthew Lee.

I mean, what I’d say on that is that, in fact, the IMF has shown a great deal of flexibility in implementing the previous program in Jordan in both the design and the goals of the program. You know, particular focus on inclusive growth, and a particular focus on creating fiscal space to help accommodate the refugee challenge that is posed for that country were some key elements of the program.

I would add that we’ve been in continued contact with donors to actually encourage them to provide more grants and concessional financing. So I’d like to say that on that issue.

There was a question on Russia. Let me take that and then I’ll come back inside. The question is actually from Thanasis Koukakis of CNN in Greece. He’s asking, in your stability assessment of Russia, you argued that if public funds are needed for recapitalization there’s sufficient fiscal space. Why don’t you then recommend the rapid introduction of the bail-in framework? That’s his question.

To which I’d say, briefly that the financial stability assessment actually discussed instruments available for bank restructuring and resolution. It also discussed plans to introduce statutory bail-in which is an important complement to the existing tools.

All right. You were first, Katarina.

QUESTIONER: Brief follow up.

MR. RICE: I’ll take Jeremy and then (inaudible).

QUESTIONER: You said that you wouldn’t like bad outcome in the negotiations with Britain…

MR. RICE: A rushed bad outcome, yes.

QUESTIONER: A rushed negotiation that leads to bad outcome. I’m just wondering if you could just reiterate what bad outcome would be? Would it be something that breaks economic ties and trade relationships between the two parties?

MR. RICE: I think I’d characterize it as something that would exacerbate even further the uncertainty that is already existing, and that would lead to an even exacerbated negative impact on growth for the UK, for the EU, and more broadly.

Jeremy?

QUESTIONER: I actually had a question on Italy. There’s been some concern about Italy and banks. I was wondering, I haven’t heard the IMF commenting on that. Do you think that some recapitalization there would be needed?

MR. RICE: Actually, we have commented quite a bit, Jeremy. We did the Italy Article IV just a few days ago. You know, the transcript is available. There was a ton of reporting on it. QUESTIONER: I’ll get it.

MR. RICE: But I’ll say to you that one of the points made in the Article IV Staff Report is that, indeed, the Italian banking system needs restructuring, in the broader sense, to become stronger, smaller, and more profitable. But, you know, there was a press call.

QUESTIONER: Sorry about it.

MR. RICE: No, not at all. David?

QUESTIONER: Thanks. One last question regarding Venezuela. Last week there were some local reports suggesting that Venezuela government had turned over some statistics to the IMF for the first time in, you know, a dozen years or so. I was just wondering if you could confirm any of that or has there just been still no engagement whatsoever with the Venezuelan authorities?

MR. RICE: No, I cannot confirm that. Yes, there has been no change in Venezuela’s relationship with the Fund. As we’ve said in the past, we encourage the government to reestablish that normal relationship with the IMF. The Venezuelan authorities have not contacted us. Am I clear?

QUESTIONER: Yes. So basically, the ball is in their court? They’re the ones that would need to make that first move, is that correct?

MR. RICE: We would need to be requested to engage because the situation is that we’ve not had a chance to assess Venezuela’s economic policies for ten years. So it would be difficult for us to provide, you know, any recommendations, advice, without substantive discussion. That would be for the authorities to request which they have not.

Let me add that, of course, we empathize strongly the very difficult economic conditions facing the Venezuelan people right now.

QUESTIONER: Gerry, can I just follow up super quick on Guinea-Bissau? Apologies, when you were going through those various countries before I missed -- what’s the key takeaway on Guinea-Bissau, again?

MR. RICE: The key takeaway, I’m sure someone was following it, is that the program is off track. The program with the Fund is off track. You know, we’re trying to work with the government, the new government, to bring it back on track. Does that give you enough?

This is the last question. Michael?

QUESTIONER: Officials in Nicosia are saying that the IMF and the World Bank gave a report to president of Cyprus and to the leader of the Turkish Cypriot about the cost of the solution of the separate problem. Can you tell us, Gerry, exactly what you gave to the Cypriots?

MR. RICE: Yes. We’ve talked about this issue before here, Michael…

QUESTIONER: It is a new development.

MR. RICE: You know, as we’ve known for a while, an IMF team has been working alongside the other international organizations looking at the microeconomic aspects of the Cyprus solution. I mean, what I can tell you is that’s still going on, that work.

Maybe what I can also tell you, as it usual with our technical assistance work, we deliver our final reports to the TA recipients, and we don’t comment publicly on those. So it really would be up to the recipients to disclose the conclusion of any such reports.

QUESTIONER: So this is not the final report?

MR. RICE: That’s all I have for you on that. Okay. Thanks very much, everyone. We’ll see you in two weeks. That will be the last press briefing before what we call the recess here, which is the board takes a break. That’s August 1 to August 12, the first couple of weeks in August. So we’ll probably come back again toward the end of August.

But they’ll be one more before the end of the year. There’s the G-20 in between, Madame Lagarde’s doing different things. David Lipton’s doing different things. And we have the WEO next Tuesday. Okay, thanks.

./.

Transcripts of a Press Briefing with Gerry Rice, Spokesman, IMF Communications Department

June 30, 2016

Webcast of the press briefing

MR. RICE: Good morning, everyone. And welcome to this press briefing on behalf of the International Monetary Fund. I'm Gerry Rice of the Communications Department, and as usual, our briefing this morning will be embargoed until 10:30 a.m., that’s Washington, D.C. Time.

Let me begin as usual with some notices of events and calendar, and then I'll come to the questions in the room. And I see we have some questions online also, so I'll do that.

Let me begin with the schedule of the Managing Director, Christine Lagarde, who will be giving a speech at the Paris Club, tomorrow, actually, Friday, July 1st, that will be in Paris. It's the occasion of the 60th Anniversary of the Paris Club, and that also coincides with the welcoming of South Korea to be the Paris Club's 21st Member. That's tomorrow.

The Managing Director will then travel to Aix en Provence, where on July 3rd, which is Sunday, she will participate in a panel discussion at the well-known annual conference of economists in France, Le Cercle des Economistes, and the theme of the discussion this year is, “What Path for Economic Prosperity.”

Then a bit later next month, July the 14th, an auspicious day for some, on the occasion of the 15th anniversary of the Center for Global Development, Madam Lagarde will give a speech there at the Center for Global Development, on the issues facing low-income countries, and highlighting the critical role of global collaboration amongst issues.

This will be followed by a conversation with Nancy Birdsall, who is the Center's President, as you know, and open to the Press. There will be a Q&A, and all the rest of it.

A couple of other things that may be of interest. Today we are publishing a working paper by IMF Staff, called “Syria's Conflict”, and the economic implications of that. It outlines the challenges Syria faces in rebuilding its economy, and that may be of interest, to you.

Secondly, today, also, we are publishing one of our staff discussion notes that focuses on the issue of withdrawal of correspondent banking relationships by large global financial institutions in several regions after the -- in the wake of the global financial crisis, this is the so-called de-risking issue, which I know is of interest to many of you. So the paper is looking at that issue broadly, and I believe we are doing a press call beforehand to give you some background on that if it's useful.

Finally, then, Maury Obstfeld, our Economic Counselor, will present our next WEO Update, World Economic Outlook Update, at a press briefing here at the Fund on July 19. So, not too far from now. The next WEO update will -- again, I know that’s of interest to many of you. So, with that, let me take any questions that you might have.

QUESTIONER: A couple Brexit questions for you. To begin, just a general question - can you update us on the Fund's view of how this impacts the global economy?

MR. RICE: I am predicting that there might be a few questions on Brexit today, including the one you’ve asked. I would like to suggest I take a few, and just for efficiency purposes. I'll take a few, and I'll come back. You know, we can do a follow up, or if I miss something I'll come back. Is that okay with you?

QUESTIONER: Sure.

MR. RICE: I know it's not our norm, but --

QUESTIONER: If that’s the case I have one more. I believe the pound is stabilized today and over the last few days, but it's still down, almost 10 percent since the Brexit vote. We've seen volatility in the dollar and the yen. In the Fund's view has the moving exchange rate been orderly? And if not, what needs to be done to stabilize global exchange rates?

MR. RICE: Good. Thanks. Yes.

QUESTIONER: Hi. So my first question on Brexit would be, you know, that we mitigate the economic impact of the Brexit, do you think that it will be critical for the U.K. to retain access to the single European market? And also a question with a follow up on the previous question. I mean, do you think that the financial volatility will -- so just after the Brexit is going to be short-lived, or do you foresee any other bout of financial volatility, in the coming days or weeks? Thank you.

MR. RICE: Okay. Are there any more? Yes. Good morning.

QUESTIONER: Good morning. There are some other countries who recently announced that they will have a point of exit of the EU. How this will influence the economy? Are we facing another recession?

MR. RICE: Yes, good morning.

QUESTIONER: Good morning.

MR. RICE: I'll take this one, and then I'll come back.

QUESTIONER: Am I on? Okay. Good. How exactly has the IMF been involved in the post Brexit environment? Is it purely technical assistance to the U.K., is it to the EU as well? Has Madam Lagarde been involved in any conversations with leadership, et cetera? Can you describe the nature of IMF's engagement, both in the past week and going forward?

MR. RICE: Sure. So, let me take that package, and as I said I'll come back and if I miss something you can pick me up on that. So, clearly, you know, like everyone else we are still absorbing what has happened, over the last matter of days and, you know, we are still assessing in many respects what the impact might be. But let me, having said that, give you a, you know, kind of a status from our perspective.

We see the near-term risk for the U.K. and the EU and the global economy arising mainly from the macroeconomic and financial market impact, of a sizeable increase in uncertainty, including on the political front. One notable source of this uncertainty concerns the terms of the future relationship between the U.K. and the EU, and these relate to questions about how long it will take to decide those terms, how the new relationship will impact business, and other actors.

And that is why we have encouraged both the U.K. and the EU to work collaboratively toward a smooth and predictable transition. You may have seen Christine Lagarde's statement to that effect.

Let me also say that the IMF strongly supports the commitments made and the steps taken by major central banks, that includes the Bank of England, and the European Central Bank, the U.S. Fed, the Bank of Japan, and others, to provide liquidity and curtail excess financial volatility. Market movements immediately following the referendum were large, but not excessively disorderly, and I think I would apply that same characterization to your question on currencies.

More broadly, we think policymakers need to stand ready to act, should the impact of financial market turbulence and higher uncertainty, threaten to materially weaken the global outlook. Decisive policies will make a difference.

We have said that the Fund will continue to obviously monitor developments closely, and we are engaging with our members to maintain a global stability in the period ahead. We also stand ready to provide support to our members as needed, so a lot of this dialogue and engagement with our members is taking place on a daily basis in the context of our regular consultations, and it’s active and it’s ongoing.

I don’t have for you a specific example of a country or region, but I can tell you that active engagement and consultation is very much the order of the day.

He asked about the impact. Again, I would say Brexit has created significant uncertainty, and we believe this is likely to dampen growth in the near term, particularly in the UK but with repercussions also for Europe and the global economy.

Prolonged periods of uncertainty and associated declines in consumer and business confidence would mean even lower growth and again, policymakers in the UK and the EU have a key role to play in helping to reduce the uncertainty during this period.

Let me perhaps finally mention, and then I can come back, that I mentioned the WEO update, July 19th, so we are, as I said, assessing the impact of this.

We will be reviewing that WEO analysis in that light, and clearly we will have a bit more detailed analysis in that update in a few weeks’ time.

I think that answers most of those questions but again, you can come back.

It’s on the lines of the protracted period of uncertainty and the turbulence, you know, again, we are watching this play out.

It’s been a matter of days, and we want to see everybody doing as much as they can to mitigate that but of course, we can’t predict that at that point.

On the whole issue of the UK and the access to the single market, that’s something that is being discussed between the UK and the EU.

It’s very active. We’re all reading it in the newspapers, so I won’t speculate on that.

I will and can point you to a very detailed, very recent Article IV on the UK which had a special detailed analysis on the potential implications of Brexit, so it’s pretty comprehensively covered, and again, I wouldn’t speculate on your question about how this is going to affect others’ political decisions.

We will be looking at the economic financial dimensions of this and basing our analysis on that. QUESTIONER: Yeah, just to follow up on -- firstly on his question. Is there a need for sort of a coordinated central bank action to stabilize exchange rates at this point and time?

Secondly, you said that policymakers need to stand ready to act.

You said that in the context of the central banks, saying they are ready to provide liquidity and intervene with necessity -- is that what you’re talking about when you say policymakers need to stand ready to act? And finally, you said that you were viewing the WEO analysis and that the Brexit will likely dampen growth, not just for the UK and Europe but also globally.

Given that there is -- I can see no offset for expanded opportunity and for growth elsewhere in the globe, does that mean that you are going to have to downgrade your global outlook? Thank you.

MR. RICE: Okay, let me take those and -- on the question of action by policymakers, let me clarify. I was not specifically or only referring to central bank action. I think, again, it’s the early days here.

We are watching how this event plays out, and I think that policymakers need to be ready to act potentially on a broad front or as needed, but I wasn’t just referring to a central bank action.

On central bank action and potential need for more or other action, again, as I just said, we very much welcome the actions that have been taken already by central banks. I think there is a speedy response.

We think it was an appropriate response and we support that.

On the WEO, and I want to leave it to the team for absorbing, analyzing, assessing everything that is coming in. I have characterized it as you said, we think there has been -- this is likely to lead to a dampening of growth, and as I said, particularly in the UK but with repercussions for Europe and global economy, but I don’t want to preempt that analysis that will come in the WEO. I think he had something -- or him, sorry?

QUESTIONER: I just want to follow up. Can you be more specific on the recommendations that you are making to the countries in Europe and also, more specifically, do you think that to remove some of the uncertainty related to the Brexit would be crucial for the UK to trigger the Article 50 as soon as possible?

MR. RICE: Yeah, on the, you know, UK Prime Minister, Mr. Cameron, has made it clear that he will leave the decision on the Article 50 to his successor.

I don’t really -- it’s a decision for the UK, so I don’t have anything to add on that.

QUESTIONER: You don’t think it’s a source of uncertainty, the fact that no one really knows when the UK will effectively exit the EU?

MR. RICE: You know, I think it depends. You know, a quick agreement that is prudent and acceptable to all would of course be optimal, but on the other hand, and I want to emphasize the other hand, that rushing to a bad outcome or a negative outcome would not be in anyone’s interest. So again, I think this is very much a matter for the UK and the EU to work out and that process seems to be under way.

On specific actions that you asked about, I am glad you did ask that question because clearly this is very much a country by country, in terms of effects of the Brexit, and it depends on very country specific factors, you know, the extent of trade, the extent of financial exposures to the UK, the effect of the uncertainty that I talked about, risk aversion in particular places.

All those things, it really depends and it will also be affected by what you just asked about the new economic relationship between the UK and the EU, which we don’t know at this point what that is -- what that is going to be.

So again, the effects will vary from country to country. I mean what can I say? Broadly, you know, it underscores clearly the need for all members of the EU to pursue and enhance their efforts, both individually and collectively to lift potential growth, to boost economic resilience, and to foster inclusiveness. We stand ready to support those efforts as needed.

Is this on Brexit? I’m going to take one more from you, okay?

QUESTIONER: Sure. You mean on Brexit?

MR. RICE: One more on Brexit.

QUESTIONER: Thank you.

MR. RICE: You can even ask about something else.

QUESTIONER: Who knows? I want to reserve my right to bug you about other things. How concerned are you about -- the uncertainty that you are saying is potentially weighing on financial markets triggering another banking, let’s not call it a crisis, let’s call it further banking turmoil in the EU? Does this risk warrant direct bank recapitalization by the EU? Such as Italy is calling for?

MR. RICE: I don’t want to -- I won’t speculate on, you know, what the period of uncertainty might lead to. What I have said, Ian, is that we see the uncertainty right now as probably the biggest risk to the global economy. That that uncertainty is a major risk, and, you know, we just discussed here why that makes it so important that there’s concerted action to mitigate that risk. As I said, decisive policies will make a difference.

On the question of European banks, you know, aside from what has happened with Brexit in recent days, you know, we have said that continuing to strength the banking sector in Europe is a major priority, addressing the NPL issue, the non-performing loan issue, in particular, is key. We talked about this very recently in our concluding statement consultation on the Article IV for the Euro Area. Again, you know, we think a coherent approach is needed, focusing not only on banks, but on structural reforms and, of course, on growth.

Are we good on Brexit?

QUESTIONER: I just have one more.

MR. RICE: Still on Brexit?

QUESTIONER: Yes, it’s still on Brexit.

MR. RICE: Let’s make this the last one then if that’s --

QUESTIONER: Then we’ll move on to the other exit. Does the Fund have any specific recommendations for the Bank of England? You know, because the pound is down sharply, so that presents inflation issues, but obviously, they’ve also got some growth issues. What’s the Fund’s view on how the Bank of England should proceed?

MR. RICE: You know, as I’ve said, we think the action and the communication from the Bank of England has been entirely appropriate and helpful at this point. I understand the governor is going to speak in less than an hour, so I’m going to leave it to him to say any more than that.

I’m in your hands.

QUESTIONER: Thank you. After the Brexit do you see any Grexit or - just kidding.

My first question, it’s about the Article IV and Greece. Usually the Article IV consultations take place once a year. In the case of Greece, the last time, if I’m correct, the report was published on May 31, 2013. Could you please tell usthe reasons the Article IV consultation reports for Greece have delayed so much?

MR. RICE: Yes. It’s not unprecedented by any means that this would be the case. It’s not a statutory thing to do an Article IV every single year in every country and every circumstance. You know, it is the case sometimes when, particularly, when we’re in intense program mode and program negotiations that -- program discussions, I should say, that, you know, Article IVs are delayed or deferred, as is the case here with Greece, as you say.

What is important is that we would have active consultation and, you know, access to economic data of financial institutions and so on. Of course, that has been the case with Greece. We have been and are in pretty active consultations, as you know. So I think it’s fairly straight forward.

QUESTIONER: Ms. Velculescu was in Greece last week and she said, and I quote, ‘Even with the full communication of reform we think this program for Greece is not sustainable.’ She also said, and I quote, ‘That the measures for the debt relief should be quantified during the drafting of IMF’s debt system,’ I read the report. That’s what she said.

How are you justifying your presence in the Greek program since the European officials said many times that the debt relief measures would be decided at the end of 2018. Of course, after the elections in France and Germany?

MR. RICE: So we talked a lot about this last time, but let me, perhaps, just reiterate in response to your question. You know, we have said repeatedly and consistently that the primary surplus targets in the ESM program are very ambitious, and, you know, to reflect the evidence political and social constraints, and ensure more realistic and credible targets over the medium term.

We have called for lowering those targets, again, over the medium term. They would still be ambitious, but we think they would be more realistic and credible, and complemented by, need to be complemented by substantial debt relief. So I think we’ve been consistent on that.

We’re not participating in the program with financing at the moment, but we remain fully engaged in the process and the policy discussions with the Greek authorities and the European partners. As you say, in terms of next steps, we’ll continue to discuss the quantification of debt relief measures with Greece’s European partners. Then on this basis we’ll update our DSA later this year. An assessment of the debt will be, obviously, that’s what that will be.

It will be on that basis then that we would make a recommendation to the Board on a potential program before end year. So I think that speaks to your scheduling point as well. Did you have anything else? Let’s just finish on Greece then if you have one.

QUESTIONER: Yesterday the biggest supermarket company in Greece, Marinopoulos, closed down and 13,000 people in one day are out of work. As you understand, this is a huge number for Greece. Many companies closed because of the crisis. The unemployment, as you know, has reached 30 percent. Do you think that you have some possibility for this tragedy at least?

MR. RICE: You know, clearly, the objective that we share with the Greek authorities and the European partners is precisely to help Greece get back on the path of sustainable growth and employment, you know, so that these kind of things don’t happen. That’s been the goal from the beginning. That continues to be the goal. That’s why we are working so hard with the Greek authorities and our partners to have a program that’s credible, and that can produce the right results for the Greek people, including on jobs. So, of course, it’s a concern. Of course, we want to work with others to alleviate that as much as possible.

QUESTIONER: I mean, this is Brexit related, but it’s about the global economy.

MR. RICE: You said it was the last one. I was pleased.

QUESTIONER: Can I just get you on the record on this. George Soros said today that the world is undergoing a slow motion financial crisis. Can I get you on the record on whether the IMF sees this as the start of a financial crisis?

MR. RICE: I can only repeat what I’ve said, that it has clearly created a significant uncertainty for the global economy that we think is likely to dampen growth in the near term. We need to be ready, all of us policymakers, with decisive actions that can help mitigate that as not just a possibility. I’m just repeating what I’ve said.

QUESTIONER: But to be clear --

MR. RICE: This is definitely the last one on Brexit, okay? Go ahead.

QUESTIONER: But to be clear, I hear what you’re saying. What you just said is a very clear, concise statement, and yet, you did not say no, the world is not in a slow-moving financial crisis.

MR. RICE: What I’m saying, it’s been less than a week since this event. You know, it’s been a matter of days. I think what I’m saying is we’re all still digesting. I think we’re assessing. I think that’s the right thing to do. I think it would be imprudent and inappropriate to rush to judgment on exactly what is or is not happening.

You know, I think we need to do our job, and part of that job will be assessing the data and taking a comprehensive look. We will reflect that very soon in the upcoming WEO. It’s going to be a matter of weeks. Again, I think that’s the appropriate way to proceed.

Anything else in the room? Then I’m going to take a couple of things online that are non-Brexit related, believe it or not. There is a question about the Portuguese economy asking, are you worried about the evolution of the Portuguese economy?

You know, we had just today, earlier today, issued a statement on that. Let me refer you to that. It’s got a lot of detail. Portugal’s economic recovery has entered its fourth year. The country enjoys favorable access to financial markets having successfully completed the adjustment program. I’m quoting from the concluding statement. The pace of growth has softened recently. Increased market uncertainty in the context of heightened risk aversion following the referendum in the UK could persist for an extended period.

Again, I’m just quoting from the concluding statement. This reinforces the importance of a credible policy framework. So I think the IMF view on the Portuguese economy is well-elaborated in that statement.

There’s a question also from Africa on Angola. It’s asking about, is Angola still interested in the technical and financial support that comes with an EFF? That’s the question.

I talked about Angola last time here. The IMF staff team in Luanda finished on June 14. That was the mission concerning the possibility of an EFF. However, more recently, the president of the Republic has informed the IMF of the government’s decision to continue their policy dialogue with the Fund only within the context of the Article IV consultation and not through discussion concerning an EFF supported program, so there is a change there.

Going forward, discussions concerning the possible EFF supported program will no longer feature in the IMF staff engagement with the authorities. That said, a staff team will visit Luanda again, possibly in October, for the 2016 Article IV consultation.

With that, I’m going to thank you very much for your flexibility and your patience today. I really appreciate it, and it was helpful to us all. I hope it was helpful to you. Have a good long holiday weekend, those of you who are in the U.S. and get to enjoy it, and we’ll see you in a couple of weeks’ time. Thanks very much.