Transcript

Transcript of Press Conference by Managing Director Rodrigo de Rato with First Deputy Managing Director Anne O. Krueger and External Relations Director Thomas C. Dawson, IMF

April 14, 2005

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MR. DAWSON: Good morning, everyone, and welcome to the pre-IMFC opening press conference. To my immediate right is Rodrigo de Rato, Managing Director of the IMF, and, to his right, the First Deputy Managing Director of the IMF, Anne Krueger. The Managing Director will have opening remarks and then we will be happy to take your questions. I would appreciate it if you would wait for a microphone to be provided, but also indicate your name and your institutional affiliation.

MR. DE RATO: Good morning, ladies and gentlemen. Thank you very much for being here, and welcome to Washington for those of you who are from outside town. I am very happy to be joined—which is customary—by the First Deputy Managing Director, Anne Krueger. I would like to refer to some of the issues that are going to be the central part of our work in the next 2-3 days, especially the ones regarding the International Monetary and Financial Committee on Saturday.

First of all, I would like to mention that this is the last meeting for Mr. Wolfensohn as President of the World Bank. I want to express my very deep appreciation for Jim's enormous contribution over the past ten years to the cause of economic development and to poverty reduction, and his very important leadership at the World Bank, and certainly in my name and I think in the name of my two predecessors, his very loyal and friendly collaboration with the International Monetary Fund. I also want to make a personal remark that Jim has been a very good friend and has been a great help to me in my first year as Managing Director of the International Monetary Fund.

I also want to thank in my first year—or not yet my first year but almost my first year here, I want to thank certainly my management colleagues Anne Krueger, Agustín Carstens, and Takatoshi Kato. I would like, also, certainly to thank all the staff which I have had the privilege of working with here and the different countries, and also, of course, the members of the Executive Committee, who provided very important help and collaboration in my responsibilities.

Coming back to the IMFC meeting on Saturday, as you are all very aware, we have three main topics: the global economy, the strategic direction of the International Monetary Fund, and our policy regarding low-income countries. I would not like to anticipate the press conference of Saturday, but just let me stress regarding the first issue, the first topic, the global economy, that we see, as our chief economist was able to tell you yesterday, that we are in a benign environment. The world economy will perform on a strong footing during 2005, continuing the clear strong performance in 2004.

But downside risk challenges have increased. In that respect, we will mention especially two: the consequences of the oil price environment, and probably the situation of relative oil prices for the future. We have made a good contribution to that debate with Research as part of our WEO presentation this time. I think that our role in surveillance is certainly part of what we are doing with the oil prices.

Certainly, we see there that the demand has very clear signs of being strong for the future, but also we see a constraint in supply, although we recognize clearly that some members of the oil-producing countries are making bigger investments, but that is not a generalized situation. Also I want to emphasize, once again, that the need for investment in refineries in oil-consuming countries is, in many cases, lacking.

As for the current account imbalances, we have been stressing for sometime now—certainly in all my tenure as the Managing Director and before—that this is a global problem that requires global and collaborative solutions among main players, and this is a good moment for them to take that responsibility. I think the International Monetary Fund has provided a clear analysis that has not been challenged by any of the governments, and has also provided the key policy changes that are needed to avoid a not balanced solution of the actual imbalances.

Of course, we live, as I said before, in a benign environment, but that should not take governments to a complacency attitude; to the contrary, this is a good moment to take some policy actions that will allow the world economy to continue growing in the next years. To wait for the environment to get less benign, we believe, would be a huge mistake, and also a big responsibility on some specific governments.

We believe that the policy changes that the IMF is advising governments to take in relation to the global imbalances are in their best interest; not only will they have a contribution to the global economy, but would certainly have an important contribution to their own challenges in the future. I also want to stress that, up to now, governments are sharing, or we are sharing with them—however you want to put it—we all agree what are those changes in policy that are required. The question is implementation, and that is an important responsibility of who is elected to govern a country, is to implement his or her decisions.

The IMFC provides a good opportunity to discuss these issues. There are other informal/formal fora that provide that opportunity, but we provide a good opportunity for that. The IMFC is a forum in which 184 countries are represented, so it is a good chance for discussing these issues. And it will be discussed; it is at the top of the agenda, and the International Monetary Fund will be, for the next few days, a good place to discuss these policies. We have and we will continue providing countries with our surveillance and our inputs for this discussion.

Regarding the second topic, which is the strategic direction of the Fund, I want to emphasize that this is an internal action that was taken in the past summer, was one of my first proposals to the Board. We have already done quite an amount of work, has been done mainly by a committee which is chaired by Anne Krueger and which the rest of the management team is represented and also an important part of Directors with the Fund. We have already provided the Board with a substantial paper on strategic objectives for the future of the Fund, and we will continue having discussions with governments about this during this weekend here in Washington. After that, we will reflect on the contributions of different governments, and already the contributions of the chairs in the Board, as to provide a more detailed analysis of our strategic challenges and implementations in the fall.

I just want to mention some of the main issues of this strategic review. The first is certainly to underline that we are a forum for multilateral cooperation, and we are a forum to promote stability and growth in the global economy. We certainly are convinced that part of our responsibility is to help countries get their economic policies and underlying institutions right so that they could provide citizens with the best management and macroeconomic policies that are possible.

We certainly committed, as is reflected in our Articles, to provide temporary financial support to allow members to address balance of payments difficulties, and also to mitigate spillover effects of crises, and to help our members to resolve difficult issues that sometimes appear in the area of governance, of the Fund's governance, notably the voice and participation of emerging markets and developing countries in decision-making. We have certainly stressed that this should be part of the strategic review of the Fund.

Also, our policy—and this is the third topic of Saturday's meetings, our policy regarding low-income countries is a very important issue related certainly to growth and poverty reduction. I just want to mention one important aspect of our policy here. We are convinced—and I think experience shows clearly—that macroeconomic and financial stability are a very essential prerequisite for growth. The success of growth in some areas of the world, like Sub Saharan Africa, proves that is true.

But at the same time, both macroeconomic stability and aid are not sufficient to promote sustainable growth. The role of the private sector in low-income countries is essential for that. We are more and more advising our low-income members to develop their own strategies, their homegrown strategies to reduce poverty, and to include very ambitious and bold reforms that allow their private sectors and international capital to be part of the solution.

Earlier this week, the Fund and the Bank released a joint Global Monitoring Report on progress toward meeting the Millennium Development Goals. I have to say that the report shows that much progress has been made, and the poverty reduction goal is on track globally. However, we also stressed that that does not mean that in most regions those goals will be met, especially in Sub-Saharan Africa. In that respect, we urge the international community to increase the aid additionally and also to open trade to all countries.

On that issue of trade, we certainly back the efforts of the WTO to complete the negotiations by the end of this year. I want again to emphasize that, when we are talking about liberalization of trade, we are talking about the liberalization of trade between developed countries and developing countries, for sure, but we are also talking about liberalization of trade among developing countries. Regional integration is a very important issue in many areas of the world.

I do not want to take more time with these maybe a little long preliminary words, and both Anne and myself are at your disposal for answering your questions.

QUESTION: Given the need for more growth in Europe, I wonder what is your assessment of the reform of the Stability and Growth Pact. Is that a way for providing more leeway to governments to give much-needed fiscal stimulus to the economy, or is it losing fiscal discipline in Europe that could be counterproductive? More specifically, yesterday the Economists of the IMF pointed out that the deficit in Italy is growing in the wrong direction. Would you advise the government to take additional measures or introduce an additional budget to correct that?

MR. DE RATO: First of all, regarding the Stability and Growth Pact, let me tell you that we believe—and I have to say that in my own experience, I believe—that the Stability and Growth Pact has served Europe well, and that at a very difficult moment of very low growth in many countries, the pact has been able to make a contribution to those countries to make important efforts to avoid an undesirable increase in public deficits in Europe.

The reform, we will, of course, look at it with all due interest, with all great interest, but the policy requirements for Europe to keep low deficits and increase their primary surpluses exist, and that is because Europe is facing very important challenges regarding aging population problems. In that respect, the basic policy objectives of making Europe an area in which debt reduction will be a key policy feature of macroeconomic policy still is and will be more in the future than in the past. So, that should be the aim of any agreement between European governments, because the big challenge that Europe is facing—not only Europe, but certainly Europe—regarding aging population problems and health financing are very, very important.

As for the pact, I would just stress some issues. First of all, the pact has to guarantee that all countries are treated in the same way and in a transparent way, and that not only countries but public opinion and citizens know exactly what to expect from the pact. Discretionary decisions have to be very transparent and certainly very evenhanded. We see merit in making efforts for more homegrown ownership of policies. So, as much as national parliaments, together with the European parliament, can provide systems of follow-up of the pact and the commitment of governments, we believe it will be an advantage of the European Union.

The lack of progress in growth in Europe is certainly an issue that we make part of our surveillance, of course. As you are all very aware, we have revised down significantly the growth prospects for Europe. In that respect, we see, and we have been advocating for quite a long time already, that the potential growth of the European economy as a whole, the euro area as a whole, is low; it is certainly below 2 percent. European governments should face the fact to make that growth potential bigger.

If you make numbers based on growth below 2 percent in Europe, those challenges of aging population problems and health problems become extremely hard. Europe needs to increase its growth potential. There are many areas certainly in which that is necessary, but there is one that is clear and we have been advocating for quite a long time. I found very positive the fact that the heads of governments of Europe, in one of their meetings in February, made similar reflections that Europe needs to have better conditions for work, have more people working, and working longer. The impediment for people to find work in Europe and the impediment for people who decide to work longer should be removed, and I have to say that some countries are making important efforts in that direction.

Then getting specifically to your question about the Italian economy, as you know we are projecting a growth of 1.2 for this year, which is significantly below what is the official forecast, and we have made a reduction of about half a percentage point since we concluded the Article IV consultation for 2004. We see a problem of productivity growth in Italy. We have seen important labor market reform in the past several years, with an increase in employment, but there is a problem of productivity performance.

To address that problem, we see that the Italian economy needs to go further in some structural reforms, including business climates, competition, and employment ratio. We see that the package of measures that the government announced in March to promote exactly competitiveness is in the right direction. We see, also, that a reduction in taxes can certainly play a role in stimulating investment and labor supply. But those tax cuts will have little impact unless they are seen as being sustainable and, in that respect, budgetary policy becomes a key issue in Italy.

QUESTION: Turkey and the IMF are close to finalizing a fresh Stand-By Arrangement, but this is coming with a delay of several months because of Turkey's slowness in meeting a number of prior actions. Could we have a few comments about Turkey's case, and is this delay bad?

MR. DE RATO: First of all, I would like to say that Turkey has had an impressive economic and macroeconomic performance in the last few years in terms of macroeconomic policy, budgetary policy, reduction of inflationary pressures, and certainly growth. We think that the Turkish economy is heading in a very positive direction. We think we have made a contribution both financially but also in terms of advice and surveillance. As you said, the authorities and the Fund have finalized a new 10 billion program at the beginning of this week, just a couple of days ago, and we will probably have a meeting about this in the Board of the Fund in early May.

There are many challenges that the Turkish economy has to face, certainly the reduction of public debt; it is still at very high levels. We believe that the authorities have to show a clear commitment to the new program by completing the first and second reviews promptly, but maybe Anne would like to add something on Turkey.

MS. KRUEGER: I think the Managing Director covered it pretty well. To make just a small, factual statement, the loan agreement initially was only concluded in December, so the delay has been there but I do not think it is quite seven months. Some of that was because actions had to be taken through parliament, and so on. I do not there is any point at which we thought that we would not have the program; it was just simply a matter of giving the authorities time to get the things done that they needed to do. As the Managing Director said, on the inflation front and on the growth of GDP, Turkish economic performance has been highly, highly satisfactory, and better than that.

QUESTION: Two groups of questions, one on Argentina and one in general. First, what does the Fund mean when it asks for a realistic strategy for Argentina to deal with creditors? Is it a precondition for Argentina to reach an agreement with the Fund? Second, can you update us on the lending into arrears policy discussion in the Board and if you think that the results of the change of Argentina leave room to revive the SDRM mechanism or other types of mechanisms that you are thinking to deal with restructuring the debt?

MR. DE RATO: Well, both questions are related. The question, of course, not only for Argentina but for any member who has experienced the restructuring process in its relationship with us, is to comply with our lending into arrears policy. Certainly, that affects the restructured part of the debt and to the unrestructured part of the debt. We are right now in the process of the Article IV consultation with Argentina and this is part of the topics. The Board has not yet had a formal discussion about the lending into arrears policy regarding this case.

When we are saying that the Argentine authorities have to put forward a realistic approach or realistic strategy regarding the unrestructured debt, it just means, of course, a strategy that will take into account, first of all, the amount of debt that has not been restructured and, the other, that whatever the solution is to that debt, it will have to be both in the scenario of the debt sustainability analysis and also in the framework of the lending into arrears policy of the Fund.

QUESTION: I have a question about my country. According to the WEO outlook, there will be an economic slowdown. Do you treat this as a relatively temporary issue, or are you beginning to have serious concerns about Russian economic policy?

MR. DE RATO: First of all, I would like to say that Russian economic policy has been successful in terms of the macroeconomic framework. We believe that the efforts of the authorities, specifically the Minister of Finance and the central bank, to face the bank restructuring and the strengthening of the banking system in Russia have been very forceful, and we certainly have been working with them in that respect. We believe that the agenda of reforms in Russia has to continue taking advantage of a very benign economic situation in part related to oil prices. We think that the decision of the government to implement a fund to absorb the excess of oil prices is and should be a priority.

We certainly advise the Russian government to keep a very close eye on inflationary pressures and, in that respect, have a budgetary policy that will counterbalance whatever inflationary pressures there are, and to avoid through budgetary expansion to contribute to those inflationary pressures, and certainly to make a clear advance in the business climate to promote the non-oil sector in the Russian economy that will be a clear guarantee for the future of balanced growth in Russia.

QUESTION: I just wanted to ask if you thought it was feasible for the IMF to sell off gold to finance debt relief, and if you think that is a desirable approach.

MR. DE RATO: Well, I think that our job is to follow our Board decisions, and that is a clear Board decision so it is a shareholders' decision. What we have already done is we have analyzed, if the Board will take that decision, that it should be taken technically by selling gold in the market, not by reviewing the value of the gold in our balance sheet, and secondly, to do that without disrupting the market; that is, to do that being part, formally or informally, of the central banks' agreements for selling gold in the market. I have to say that my impression is that those two basic rules are acceptable by most of the constituency, if the decision were to be taken. The decision is up to the Board members.

In that respect, I just want to underline that if that decision were to be part of a package of debt relief, it should be taken into consideration that the part of that package regarding the debt to the Fund by low-income countries not even arrives to 20 percent of the whole debt so that we will have to be part of a much broader approach. At the same time, we believe that if creditor countries, through international institutions or bilaterally, take debt relief as an alternative—and they have already done that with the HIPC Initiative—that also should be part of a broader approach to development and growth and financing of the development goals, and I take the opportunity of this question to once again underline the need for more aid and more resources, additional resources to finance development.

QUESTION: A follow-up to your request that Europe raises its growth potential. The German government plans to introduce a minimum wage across the board in order to protect the German labor market. What do you make of that, and do you think that such measures might become prevalent in Europe?

MR. DE RATO: Well, we will have to see the details of that proposal. I have to say that what Europe needs is to be able to cope in a globalized world. We have serious doubts that certain measures will make domestic economic actors aware and will increase their capacity to face global competition. In that respect, although I want, again, to repeat that we would like to see the details, we believe that what Europe as a whole needs is more competition domestically and across European markets as part of the strategy of Europe to be a more dynamic actor in the global economy.

QUESTION: The IMF is forecasting 3.7 growth in Brazil this year. That is less than the rest of the world, less than Africa, less than Latin America. I would like to have your assessment on the factors that, even with 3.7, inflation in Brazil seems to be picking up.

MR. DE RATO: Well, our prediction for Brazil, you are right, is a small reduction from last year's growth, taking into account what we see as a reduction in the world economy and also in the area. Inflationary pressures, I think that the central bank has been right in trying to pre-empt them by its monetary tightening in most of last year and the beginning of this year. We see that the recent decisions by the government regarding strengthening the capacity of control and quality of public investment is certainly positive.

The reform agenda in Brazil still continues to be extremely important in terms of making the financial sector more competitive, making the budgetary system more flexible, and increasing the capacity of creating new employment through labor reforms. The government has advanced on many of these issues, and the government has proven that it is willing to continue in that respect.

So, we see clearly that the combination of a credible monetary policy and a strong fiscal policy that is reducing the vulnerabilities of the country, and a clear reform agenda are the best approach for Brazil to continue in the next years to increase its growth potential and reduce vulnerabilities. We believe, also, that, as I said, the credibility of monetary policy right now is playing a very important role in Brazil.

QUESTION: Two questions, if I may, Mr. de Rato. First of all, you spoke of the need to, again, increase aid and funds for meeting the Millennium Development Goals. What is your assessment of the hopes for achieving concrete, tangible progress on that by either the July G8 summit or the New York summit in September?

Secondly, a U.K. question. Yesterday your Deputy Chief Economist suggested that the U.K. needed to have fiscal consolidation amounting to 1 percent of GDP over five years. The U.K. labor party responded by criticizing the Fund's forecasting record and accusing it of having an ideological preference for balanced budgets. Do you think it is regrettable that the U.K.'s governing party responds in that way when its Finance Minister is the Chairman of the IMFC?

MR. DE RATO: Well, first of all, we have contributed to the analysis of all the different proposals to increase the financing of development, and that will be part of the discussions both in the IMFC and also in the Development Committee on Saturday and Sunday. But at the end of the day, all the proposals have their trade-offs, so that means that both have-not both, there are more than two-have problems of implementation, but some of their aspects are feasible. The question is for governments to make a decision. Even if the decision is made that some of the proposals or a mixture of them will be implemented, that will take some time. Right now, what is clearly needed is that governments increase their budgetary allocations for development.

In that respect, referring to the U.K., we value very strongly the U.K. commitment to provide direct financing for ten years to the debts of an important amount of low-income countries, especially in Africa. So, in that respect I want to recognize that effort by the U.K. government, putting action with words, which is not that often in this debate about development.

We have been advising the U.K. government regarding its budgetary policy recently-well, always, but especially in the last Article IV consultation. We believe that it would be in the interest of the U.K. economy to reduce the recent deterioration of the fiscal position and to go back to the golden rule, which was, if I remember correctly, a U.K. proposal and a commitment by the government. So, it is not that we are stressing any ideological prejudice; we are saying just that you were right to put the golden rule as a system. It is not the only approach to budgetary policy, but it is an approach that we have backed.

As for the rest of your analysis, I will read it very carefully in your press.

QUESTION: Can I take it from your previous answer that you share Mr. Wolfensohn's view expressed about an hour ago that what we will see this weekend on debt relief is just a refining of the various proposals and that a decision will probably be taken later in the year at the G8?

MR. DE RATO: Well, I do not want to anticipate what governments are going to decide in these meetings; I think we will have to wait. What I insist is that the new proposals or the new schemes to raise more money for development, we believe they are serious and we believe that they should be taken seriously. We have done that; we have studied them and we are making governments who propose them and the rest of the governments aware of the different trade-offs and difficulties in applying every different system. But at the end of the day, the question is to make a decision, because technical analysis is not going to provide more aid; what is going to provide more aid is that governments take a decision.

Whatever decision they are willing to take, and if they follow our technical advice, that decision should be additional. One danger is that if a new scheme of financing is put forward, governments will say, well, this is going to take care of my contribution to development so I do not have to make any more contribution to development in my national budget. That will be a backlash. We need to make clear that additionality is an essential approach to development.

The second is that a decision has to be made by the governments, and even if they make a decision tomorrow, to implement the decision on whatever new scheme they decide will take a reasonable amount of time to be implemented. So, to face the challenges of 2005 and probably 2006, additional resources in the budget have to be found by governments. I put the example—which I want to put again—of the U.K.; I think the U.K. and other countries are also increasing their contributions. Sweden is another clear example.

I do not want to be exhaustive about that, because I could forget some of the countries and be unfair. Many countries are making that effort, and that is what is needed in 2005. Then if they are able to arrive to an agreement regarding new schemes, well, we will certainly be there to help them implement it in the most efficient way.

QUESTION: You mentioned about labor market reforms in Italy and Germany. You have been to India recently. What is your assessment of the labor market reforms in India?

MR. DE RATO: Well, I was in India, you are right, about three weeks ago, even less. I want to express, first of all, that the Indian authorities have a very clear agenda. I want to compliment the authorities and also the rest responsible for the implementation of the new VAT tax. We think, also, that the opening of the country, the liberalization of the country in many areas, important ones like the financial sector, is certainly needed and welcome. We see that the budgetary framework of the Indian government is a serious one, a clear one, and we see also that monetary policy and the credibility of anti-inflationary policy is well rooted, as we also commend the authorities for their financial sector strength. I also want to mention that managing their exchange rate flexibility has also been very successful.

Labor challenges in India are very important. India, by all accounts, will need to create in the next ten years a hundred million jobs just to stay at the actual level of unemployment. It is a very challenging horizon. In that respect, labor reform, labor flexibility could help certainly India not only to create more employment, but also to reap the benefits from such opportunities—for instance, textiles—that are offered to the Indian economy right now, to the Indian society.

I had the privilege and the chance to talk to the Prime Minister and, of course, to the Finance Minister and to other economic authorities. But specifically in my conversation with the Prime Minister, he made it clear that he saw this objective as important, and that the government was going to find political and social consensus to make India more able to profit from the chances that the global economy is offering the Indian economy right now.

QUESTION: Two little questions, one about the current account deficit of Spain; you are projecting 4.8 for this year of the deficit. I would like to know your thoughts about this. Secondly, Raghu Rajan yesterday said to us that, at the current growth potential of Europe, Europe cannot afford its welfare state. As far as you know, this kind of reforms of the welfare state needs political support of societies, so how to deal with this issue.

MR. DE RATO: In the last Article IV consultation, we have been advising Spain to balance their growth pattern, and that is, of course, to increase its competitiveness. To do that, labor flexibility and credible anti-inflationary policy are clearly needed.

As a member of the European Union, Spain is benefiting from a very expansionary monetary policy and, of course, as a member of a monetary union, the importance of a current account deficit is probably different than in other cases. That is why we have been clearly advising the Spanish government to not erode, but to increase their previous budgetary achievements, and to keep a strong budgetary policy with clear surpluses, and to make the provinces, the [inaudible] part of that process, and increase the transparency of different responsibilities. We see clearly that, in terms of increasing competitiveness in the country, especially in sheltered sectors, international competition is essential and that the government should take steps in that direction, and to avoid policies that index inflation to internal costs.

As for the reform of the social agenda, first of all, in Europe, I want to underline that reforms have happened in Europe. You had a very important pension reform in France a couple of years ago. You have reform in Italy; you have important labor reform in Germany, including the public wage system; you have had pension reforms in Spain four or five years ago. So, Europe has been doing important reforms.

The question regarding safety net or the social policies in Europe and their financing is not only related to the actual circumstances, but also to the future challenges; and those are obvious in Europe. They are also obvious in some other countries, like this country, the United States, but even developing countries. Anne Krueger was very clear on her analysis of that even last summer, if I remember correctly. See may want to say something about that.

So, this challenge of an aging population is becoming a global challenge for all countries, but Europe is probably an area of the world that has one of the biggest, if not the biggest challenge in that respect, and that has to be faced and the population has to be aware of that. That demands that pension reform has to be at the top of the agenda of governments and that budgets have to leave room for maneuver to face that challenge, and that is what we are advising clearly in the Stability and Growth Pact, and especially that the policy implications for a reduction of deficits in Europe be implemented seriously.

I think that debate can and has already happened in Europe. Reforms have been achieved in Europe, and the question is to continue on that path. Of course, part of the financing of the social agenda has to do with employment. If you have more people coming into the work force, if those people are able to work—if they want to—more, in a more competitive environment, you have better chances to finance your social expenditure than if you do not.

MS. KRUEGER: I think on the pension reform issue, the way to think about it is to think about how many workers there are financing how many people's pensions. Quite clearly, in all of the industrial world, the demographic challenge coming up is huge; we are going to have far fewer workers per retiree and, therefore, unless something gives somewhere, there are going to be taxes that will be highly distortive on labor, or governments will have to reduce or not honor their commitments, or they need to do something sooner.

Now, that happens earlier in most of the industrial countries than in does in the developing world, which in some cases gives the developing world itself some room for maneuver; but they, too, have their problems of social insurance schemes that cover only part of their labor force, and those parts are covered at very high rates and very often with deficits in the budget. So, one of the things we are doing in many countries in the developing world is urging them now to do the reforms that will enable them (a) to broaden the system, and (b) as their demographic challenge comes later on, to do something. So, it is a different picture everywhere. The fundamental point is that there is nobody in the world who is going to be able to go on—unless they have already reformed their systems—with the commitments they have made without making some changes somewhere, and the question is how to do that in a way that causes the least disruption.

The other part of it, though, which seems to me is overlooked in discussions almost everywhere, is that if one now takes actions, maybe begin—as the United States did in the early 1990s—increasing the retirement age three months every several years, and things like this, if that happens, all of these things at the margin can make a difference so that there will not be a crunch. The alternative is to wait until all of a sudden you find these huge fiscal bills as retirees are increasing rapidly relative to the working population. As you know, Japan is sort of the leader in all of this, but other countries are not very far behind.

MR. DAWSON: Thank you very much.