Thursday, July 21, 2016

It has been a common assessment between us that the Eurogroup agreement of May 24 2016 was an important landmark because it was decided there that the Greek debt is not sustainable and that measures need to be taken. And this is a game changer, because from now on we discuss more technical details about how and what and when, not “whether it is needed,” and this common understanding of the two sides I think is a very important fact.

We discussed the issues of the Program, the difficulties and the opportunities that the Greek economy has. We also discussed the consequences of Brexit but also of developments in our neighboring country.

Alexis Tsipras’ observation is correct that what Europe needs now after Brexit, is not to start a vague discussion about more or less Europe, but for a Europe that is more social, more effective, that responds to the problems of citizens with regard to salaries, pensions and the needs that the social state must cover.

I thanked Jack Lew for all his contribution. He is leaving from here today going to the G-20 meeting where he will have the opportunity to meet with many factors that impact not only the global economy but also the future of the Eurozone and of the Greek economy. And I am sure that, as in previous such meetings, he will go there as a friend of Greece and that he will be able to open the important discussions that are needed to so that decisions be made on the Greek debt by the end of the year.

SECRETARY LEW:   Thank you, Minister Tsakalotos. I want to thank both the Prime Minister and Mr. Tsakalotos for hosting me here in Athens today. As the Minister said, we have talked regularly and at great length over issues regarding the future of agreements between Greece and its international partners, and we come here today in the spirit of a very deep and ongoing set of constructive relations.

Over the last year Greece has made significant progress in meeting important reform commitments, which have helped to stabilize the economy and reduce uncertainty.

I was encouraged to see Greece and the creditor institutions reach a successful conclusion to the first program review in May. It’s also encouraging to see recent growth forecasts come in above expectations, which we certainly hope is a sign of a better future ahead for Greece.

I very much understand how challenging it has been to pass the necessary reforms to put the Greek pension system on a sustainable path and to take steps to begin tackling the non-performing loans that burden Greek banks. And I recognize the tremendous efforts that the Greek government has made to date, especially considering the challenging external environment.

It’s important, as we look toward the remainder of the summer and the fall, that Greece continue to implement the measures that have already been passed and make headway on the next set of milestones due in October, including by following through on privatization plans and moving forward with critical financial-sector reforms. I believe that rapid progress on pro-business reforms, including the privatization program and structural reforms in product and service markets, could pave the way for a positive cycle that reinforces growth and investment.

Progress on reform is also important so that European leaders can soon begin to discuss with the IMF the timing and details of debt relief, which the Eurogroup committed to in May, and putting Greece’s debt on a sustainable path is critical to Greece’s long-term economic health. I encourage all parties to be flexible to pursue and succeed in concluding this fall’s negotiations.

Last week I had the opportunity to meet with my counterparts and business leaders in Paris, Berlin, London and Brussels, to discuss the period of change following the UK referendum. During those meetings I reinforced that the United States remains committed to working with our UK and EU counterparts as they work through this transition, to ensure continued economic stability and advance shared economic growth and prosperity in Europe and around the world.

An outcome from the UK and EU that produces a highly integrated relationship between the two is in the vested interests of Europe, the United States and the global economy.

As the Minister said, I will depart Athens this evening for the G20 in Chengdu, China. The meetings in Chengdu come at a moment of continued uncertainty in the global outlook, making it important to redouble efforts to use all policy tools, including monetary, fiscal and structural, to boost shared growth.

The global outlook also underscores our focus on the commitment made at the last G20 in Shanghai, to consult closely with one another on exchange rate policy, and to refrain from competitive devaluation.

We have seen progress in this regard since the last G20 meeting, and we will continue to encourage the use of the full range of policy tools to promote shared and sustainable growth.

Again, thank you for your hospitality and I look forward to taking a few questions.

MODERATOR:  (In Greek) Thank you very much. Ladies and gentlemen the two Ministers will receive four questions. Please mention your name and your outlet. First question please, Mr. Siakantaris from “ALPHA TV”

QUESTION: (In Greek) Thank you very much. Mr. Lew you said that the “turmoil in Turkey makes stabilization in Greece more imperative,” however this moment we do not have stability in the debt –only some general promises — nor in the targets of the budget, the Commission has told us “to forget about more realistic targets on the deficit,” while there is uncertainty about the participation of the International Monetary Fund, but also about the banking system.

In your opinion what needs to be done, specifically, so that Greece can become an islet of stability today, not in 2020? Thank you.

SECRETARY LEW: Our position has been clear for quite some time, that it’s important for debt restructuring to be part of an overall plan for Greece for the economic future.

As I mentioned, we thought the agreement in May was an important step forward. It reflects an agreement in principle that would have debt restructuring be part of an ultimate plan.

The details obviously matter. I think that the discussions that will be underway in the coming months are very significant.

And, you know,  my view of the geopolitical significance of Greece is not new. It’s something I’ve been saying for several years. And I do believe that in the current environment what we saw was the agreement reached in May ahead of the vote in the UK was a good thing, and I continue to believe that the sooner these issues are resolved, the better.

So I’m not going to get into the specifics. There are a lot of different ways this can be done. It is important to look at what the affordability of ongoing debt payments are over time, to make sure that it’s something that is consistent with what the fiscal and macroeconomic situation will present. And there are different ways of solving the problem, and you can do the arithmetic different ways.

But in the end the result needs to be a stable system where Greece can meet its payment obligations and return to and continue to grow.

Ultimately the goal ought to be Greece growing and becoming a more prosperous country. I think the reforms that have been made have been very important. They are not just important because it was necessary to get agreement with the institutions. They are important because it has helped to rebuild the foundation for a strong economy here in Greece.

And I think that the government, in passing the legislation and in now implementing it, is taking steps that will help build that foundation for a stronger Greece.

There is still more work to do, as I said in my opening remarks. And I think that the challenge that Greece is undertaking is a significant one, but completing the work, continuing to implement privatization, doing the work that is needed to address the non-performing loans would very much strengthen the position that Greece brings in to a negotiation in the coming months.…

QUESTION: (In Greek) You are happy with the pace, then, of these steps, from the creditors’ side?

SECRETARY LEW:  Well, no, I have been clear for a long time that I believe debt restructuring is very important. I think an agreement in principle that lays a foundation for debt restructuring is an important step forward.

I think ultimately an agreement that restructures the debt is needed, and from the perspective of returning to an environment where it will be attractive for long-term investment, having long-term clarity is important.

So getting out of the cycle of either annual or more frequent negotiations and a near crisis is an important accomplishment that lies ahead.

The fact that we are sitting here now in July and the world is not worried about an immediate crisis in Greece is a good thing, but it doesn’t mean that the issue is once and for all resolved, and that’s what the discussion in the coming months I think will need to be about.

MODERATOR: Thank you very much. Second question, Niki Kitsantonis from “New York Times”

QUESTION: Secretary Lew… Excuse me, Niki Kitsantonis from “New York Times.” The IMF and Greece have both argued that the targets set by Greece’s European partners for a primary surplus over the next few years are too high. Would you argue that there is a case for Greece’s European partners to give, to offer Greece some leeway, in view of the need for greater stability, and just in terms of belt-tightening?

SECRETARY LEW: I think the end result of reaching a conclusion where the IMF and other parties can be comfortable that the debt is on a sustainable path is what’s needed. There are multiple paths to accomplishing that goal, and the challenge is, as an economic matter, to make sure that the running cost of servicing Greece’s debt is something that the budget fiscal projections can support.

One can achieve that with different mixes of what you do to address targets for fiscal surplus or the amounts of debt that are restructured. I’ll leave it to the institutions to work out the right balances. There are obviously political issues as well as economic issues at play. I have believed for a long time that the right approach is a pragmatic one that gets to a bottom line that leaves a very clear path forward that is stable and affordable and sustainable.

And I certainly hope that the discussion over the coming months produces clarity in that regard.

MODERATOR: Thank you very much. Mrs. Laskari from “TA NEA”

QUESTION: (In Greek) Good afternoon. Do you support Greece’s effort, as it has become clear from the positions of the economic team, for a more immediate review of the targets for the fiscal deficit? In other words, would it be better if our country did not commit to a surplus of 3.5% in 2018 but a little lower in order for the economy to take a breath and get stabilized more easily?

SECRETARY LEW:  I think that if you look at the projections of where the budget and the economy are going right now compared to a year ago or two years ago, there is significant progress that’s been made. There are signs that the economy is turning from recession to growth. I think that the package of steps that were taken, both fiscal and structural, have been very important.

There are also real needs that have to managed within the budget, to take care of both urgent needs of the Greek people and also promote an environment that is conducive to future investment.

I think the question of what the target is, is something that Greece will need to work through with the partners. In the long run and the medium term, the challenge is to get the trajectory onto a path where looking outside of the immediate window for a longer period of time it’s clear that Greece can sustain its debt.

To the investment world, the notion that it’s OK now but it may not be OK in the future is not a good signal, in terms of getting investment back to where it needs to be.

So concluding these discussions so that there is a greater degree of confidence, not just about the short term but about the medium and the long term, is important. And as I say, you can do that in a variety of different ways.

I am not going to take a hard view on where Greece and the institutions should end up, except that in the end it has to work. And I would emphasize pragmatism.

And so much progress has been made. There has been an enormous amount accomplished through the reforms that have been implemented. The economy is pointed in a better direction. I think that completing this work with the kind of package that has Greece both adhering to reforms and staying on the path of implementing the additional reforms, and then brings the debt sustainability conversation, the debt restructuring conversation into clear focus is very important.…

MODERATOR: Mr. Diamantopoulos from “ANTENNA”

QUESTION: (In Greek) If a close friend of yours asked you: Should I go to invest in Greece? Should I go there today? Should I wait? For how long? I am talking about a really close friend. What would your answer be?

SECRETARY LEW:  I make it my practice not to advise individual investors, your friends or others. I think that anyone looking at where Greece is today, compared to where it was a year ago, has to take note of enormous progress made, and I think the commitment to completing the work will be something that has a lot of impact on confidence, in both the negotiations that go forward with the institutions and in the investor community.

And I do believe that getting a resolution to the outstanding issues in a way that reduces the likelihood of negotiations becoming an ongoing process to be revisited on a regular basis will help to restore the enthusiasm of investors in Greece.

And as I said at the opening, I am delighted to be here in Athens today. It’s a city I always enjoy visiting.…

MODERATOR: There is time for one more question. Mrs. Saleha Mohsin from Bloomberg.

QUESTION:  Secretary Lew, if you could talk through what the risk is of the IMF not being involved in a Greek bailout, and also how would you address the IMF’s comments that it needs a concrete debt relief plan to participate in a bailout?

SECRETARY LEW:  I think the IMF has been an important partner in the work that’s been done to bring progress forward, both to have the support that Greece has needed, but also the environment in which important reforms have been agreed to.

I continue to believe it’s important for the IMF to be part of the conversation. It’s clear that for many European participants it’s a key consideration. I also think the IMF brings a perspective to the process that is both important and helpful. I mean, apart from the United States, the party that has been most focused on debt restructuring is the IMF, and it’s because it’s a very pragmatic approach they take. They look at the numbers, they look at the analysis, and they ask: is the projection, going forward, credible?

In a world where you have the combination of a very high level of indebtedness and high targets of primary surplus, it’s very difficult for that debt sustainability review to reach the conclusion that the IMF aims for, which is why they have made so clear that there has to be some ‘give’.

We believe debt restructuring is key to that, and have for a long time. I believe the IMF has been a very helpful partner in the process, even though it’s been a relationship that, by its basic nature, creates a certain amount of stress, because it plays a role of putting conditions and requirements forward.

I think, from a perspective of getting a long-term solution in Greece, what the IMF is advocating in terms of debt restructuring in particular is very important.

QUESTION: So you are fairly confident that they will remain involved?

SECRETARY LEW:  I can’t speak for the IMF. I can speak for my view of what’s important.