Greece’s economic crisis Saturday dominated the penultimate day of the International Monetary Fund and the World Bank’s annual meeting in Washington, with European Central Bank President Mario Draghi warning the situation is "urgent." Finance ministers, bankers and other top officials met in the U.S. capital to discuss the work of both organizations, focusing on global economy, international development, and the world’s financial markets.
However, concerns about Greece falling out of the euro dominated discussion from the get-go, with attendees from all over the world expressing concern about the impact of Greece’s increasingly fragile economy.
"We all want Greece to succeed,” Draghi said. “The answer is in the hands of the Greek government. Much more work is needed now and it is urgent.”
At the top of discussion was debt repayments due next month as part of its schedule to pay back the $347 billion it owes creditors. While little is known about Greece’s finances, it’s rumoured paying the installment would leave Greece unable to pay for welfare bills and public sector wages. Its financial instability has led many economic experts to speculate the country may fall out of the Euro currency, which could leave Europe open to the same financial turmoil it faced during the global financial crisis of 2007 and 2008.
“The short-term danger of contagion [from a Greek exit] is difficult to assess, but we have enough buffers in place. And even though they were designed for different circumstances, they are sufficient. But we are entering uncharted waters,” Draghi said.
Greek finance minister Yanis Varoufakis said there had been progress in “formulating a well-functioning policy dialogue” between Greece and its lenders: the EU commission, European Central Bank and IMF. Varoufakis also called on other economic leaders to slim down their list of demands in return for a vital $7.8 billion loan that Greece needs to keep it from default.
U.S. Treasury Secretary Jacob Lew said during a speech to the IMF’s steering committee a default on Greece’s loan debt would “create immediate hardship” for the country and damage the global economy.
Further talks on Greek debt will take place in Riga, Lativa, next month among eurozone ministers. Although German finance minister Wolfgang Schäuble said that an agreement didn’t seem likely.
Some highlights from the meeting:
French Finance Minister Michael Sapin on the fall of the euro being good for Europe: "The fall in the value of the euro is very good news for all of Europe and in particular for France. It's very good news."
Brazilian Finance Minister Joaquim Levy On Brazil's Economy: "The perception of Brazil is changing -- it is more positive," he said. "I am more confident about the situation now than when I arrived [at the IMF meeting this week]."
U.S. Treasury Secretary Jack Lew on the Asian Infrastructure Investment Bank: "We are ready to welcome new additions to the international development architecture, including the Asian Infrastructure Investment Bank, provided that these institutions complement existing international financial institutions, including by adopting their high quality standards. Having the AIIB co-finance projects with existing institutions will help demonstrate a commitment to these high standards."
Russian Finance Minister Anton Siluanov's statement to the IMF steering committee: "One of the principal sources of uncertainty in the world economy may well be doubts about the success of unconventional monetary policies in Japan and the euro area. ... The Japanese experiment shows the limitations of accommodative monetary policy in the presence of deeply entrenched structural problems."
Indian Finance Minister Arun Jaitley to the IMF steering committee on unconventional monetary policies in developed countries: "The exit, when it commences, could create turbulence in global financial markets. Central banks in the major advanced economies, therefore, need to take into account the impact their policies may have on other emerging and developing economies. The IMF, which has been supporting such policies, also needs to reconsider whether UMPs militate against the core mandate of the Fund to maintain exchange rate stability. ... It is imperative that interest rate normalization by central banks in the major advanced economies is predictable and well communicated."