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First Move with Julia Chatterley
21-Year-Old National Guard Member Arrested, Due in Court Friday; U.S. Banks Reports Earnings Amid Global Financial Stress; El-Erian: Global System Hasn't Acknowledged Changes; Debt Restructuring Talks Underway for Emerging Markets; Malpass: The Urgency is Clear on Debt Restructuring; Finance Ministers Meet Amid Global Economic Uncertainties. Aired 9-10a ET
Aired April 14, 2023 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:00]
JULIA CHATTERLEY, CNN HOST, FIRST MOVE: And a warm welcome to a special edition of "First Move". Coming to you live from the headquarters of the
International Monetary Fund here in Washington D.C. A whole group of Finance Ministers, Central Bank Governors, thought leaders are meeting here
at an incredible and exceptionally high risk moment.
I think for the global economy, we have growth and I can take you through all of the issues and the debates going on growth, but it's slow. Inflation
is retreating, but of course, we know it's still too high. There's unsustainable debt levels across emerging markets. Plus, the recent wave of
let's call them tremors across the banking system too.
All adding to what the International Monetary Fund's had coming into this meeting is a fog of economic uncertainty. Well, the good news is, we're
going to be here and hearing from a distinguished group of newsmakers over the coming hour just to get and test their level of concern at this moment.
How do we reach consensus? How are they debating some of the big issues and what are the most important aspects to focus on as we head through the rest
of the year? Coming up, over the next hour, we have the World Bank President David Malpass. He of course has been leading this global debt
roundtable to discuss the urgent need to tackle the growing debt crisis hitting emerging markets.
We have also Mohamed El-Erian, Adviser to both Allianz and Gramercy Funds on the huge challenge that still faces. Policymakers including Central
Bankers how to fight inflation, while at the same time preserving financial stability and not denting growth too much further.
Also we're going to hear from the Euro Group President Paschal Donohoe, on how EU nations can jumpstart growth while balancing the books. Of course,
we all know reform is hard consensus is hard too, as we're seeing right now across France. Plenty to come on the show, and much to discuss.
For now, though, we do begin the show and start in Boston, where a 21-year- old man is accused of leaking classified information, and is due to appear in court later today. The FBI has arrested Jack Teixeira on Thursday, is
believed he posted the highly sensitive documents online to impress his friends.
Natasha Bertrand joins us now from the Pentagon. Natasha, huge questions to ask ahead of this appearance in court. But primarily, I think how someone's
so young and so junior have access to this information was available to leak it in the first place?
NATASHA BERTRAND, CNN NATIONAL SECURITY REPORTER: Julia that is the big question that the Pentagon is grappling with right now. And that is
something that the Pentagon press corps grilled. The Pentagon Press Secretary about yesterday, someone who is so junior really had just entered
the military a few years ago was an E-3, which is one of the lowest rankings of an enlisted member of the military.
How did he access these top secret documents, many of which are briefed up to the Senior Pentagon Leadership every day, including his high, of course,
as the Chairman of the Joint Chiefs of Staff, Mark Milley? So the question now is what is the military going to do about this problem, because
clearly, this kind of highly sensitive, classified information is just being seen and disseminated to too many people?
Well, what we're told is that the Defense Department has launched an internal review of intelligence access, and they're going to be looking at
basically best practices here. Do they need to change how this information is distributed, because previously, we were told this information was seen
and disseminated to thousands of people in the government?
Clearly, this individual who is alleged to have leaked these classified documents was able to see them somehow, he may not have had the proper
clearance to actually access them properly, that is still being figured out here. But still, he was part of the intelligence wing of the Air National
Guard in Massachusetts, which would presumably give him access, or at least visibility into a lot of these documents.
So the Pentagon now saying, according to our sources that they're severely limiting the distribution of these kinds of materials. In the meantime, as
they do this review, and we are told that officials across the U.S. government who were receiving these kinds of documents over the last
several months and even years have actually stopped receiving them in recent days.
So clearly, the Pentagon is already trying to crack down on where, why and how this information is distributed, Julia.
CHATTERLEY: Yes, Natasha, one of the other questions I think that everyone's asking, particularly in light of other nations that are involved
in this, who've come forward and said, look, some of this information is incorrect. Do we have any sense of his ability to be able to edit some of
this documentation as well? I think that's one of the other big questions is the veracity of the information that's now out there.
[09:05:00]
BERTRAND: Yes, it's a great question and actually according to The Washington Post some of the documents that he was disseminating onto this
private group chat he had actually transcribed by hand. It became very tedious for him after a while. And so eventually, he just started taking
photographs of the documents themselves and uploading them onto this server.
It is not clear at this point, whether he altered any of them, they do appear to be photographs of these of these hard copies printed out copies
of these documents themselves. So it would have been likely a little bit difficult to edit them in that way. But once these hit the internet, and
once they started being spread around.
For example, on pro-Russian telegram channels and on Twitter, that is when bad actors could have potentially taken them and altered them. And in fact,
we are told that at least one of the documents was altered after the fact, by someone who had the motive to inflate Ukrainian casualty numbers as part
of the war in Ukraine, for example.
So it wasn't necessarily that he altered them, although that will be investigated, but that once those bad actors got a hold of the documents
that were already out there. They seized on them to produce disinformation, Julia.
CHATTERLEY: Yes, it's all just completely mind boggling and certainly a hot topic of conversation here and mid trust. And when Jim political partners
here and the discussions taking place. Natasha, great to have you with us. Thank you so much for that. Now on to one of our other top stories today,
French priests on high alert this hour ahead of acute court ruling on pension reform.
Protestors have clashed once again on Thursday, angry over the French government's plans to raise the retirement age by two years. Earlier here
at the International Monetary Fund, Richard Quest spoke to the French Finance Minister who condemned the violence.
(BEGIN VIDEO CLIP)
BRUNO LE MAIRE, FRENCH FINANCE MINISTER: I will not say that the leverage of an easiest growing we have violence in the street, I strongly condemn
all violence. But nevertheless, the process is going on. We are waiting for the very last decision or the French Supreme Court tomorrow.
I just want to emphasize how vital this reform is for our pension system. We have a very efficient, very generous pension system. But we need to
ensure to the French citizen, that there is a financial balance by 2030. This is the purpose of the reform.
(END VIDEO CLIP)
CHATTERLEY: France of course is facing a similar challenge to many other Eurozone nations and other global nations. How to balance the books, after
years of high spending necessary high spending at a time of high uncertainty? Here were some of the answers we hope Eurogroup President to
Paschal Donohoe, great to have you with us, sir.
Just looking at the situation in France, but it's a challenge that many nations face at this moment, not wanting to add to the inflationary
outlook, but also having to balance the books after years of spending, how do you find the balance?
PASCHAL DONOHOE, PRESIDENT OF EUROGROUP: By acknowledging the fact that we have come through very, very difficult times that our economies are still
growing, despite the many challenges that we are facing, due to the war in Ukraine.
We're still in a situation of high unemployment and we have to use those as foundations, to also make the case for budgetary policy across this year
and next year changing course, because we are at a time of high inflation, we are at a time in which the cost of borrowing is going up. And we need to
tread the path between responding back to that, and then maintaining the support of our societies for the change that is needed.
CHATTERLEY: You just have to do that and get re-elected as the French government, I think proving here. And it's a communication message that's
difficult for people at a time of high prices and difficult choices.
DONOHOE: So I think the two components to us there are as you say what's the communication of policy, but it's also what the content of policy is.
From a content point of view, it is about saying we do need to make some changes, we have to move away from the kind of spending plans that we had
during COVID.
But when we are doing that, we can still maintain investment and -- things that really matter to our societies. And the EU is playing a huge role and
our true our recovery and resilience bond. And then the second scene that you just said there, which is the sea of communication.
As we're implementing those policies, making the case for why that change is needed because of inflation, stays with us into the medium term out of
high rise. We're all going to be a lot poor for a lot longer. And we need to make the case for avoiding that happening.
CHATTERLEY: Yes, and I think also people need to understand that the European Central Bank is doing its part to raise interest rates.
Governments also have to not add fuel to the fire in terms of the inflationary picture with their spending too. The other option is looking
outside for growth opportunities as well, India, China, I think sort of bucking the broader trend of growth slowdown and concern as we come into
this IMF meeting.
China's created some eyebrow raising, I think with some of the European leaders that have had it over there and this balance between wanting China
to play a role in the resolution of conflict in Ukraine, but at the same time representing it's still an ongoing growth opportunity. How do you find
that balance?
[09:10:00]
DONOHOE: So, we of course do need to engage with China from a trade perspective. Again, it's worth acknowledging, however, that for last year.
The overall economic growth of the euro area was actually ahead for example of where America was. So we need to approach that kind of negotiation and
that kind of discussion with China from a greater position of strength.
I mean, it does appear to me that further trade with China is an inevitable feature of the global economic model that we're in. But from a European
perspective, I want us to be involved in those trade discussions and those commercial opportunities in a position of greater strength than we are at
the moment.
What does that look like policies to help Europe grow quicker, despite the inflationary balance we need to maintain? And then how we can invest in our
own banking, our own capital market systems, so that we're better in a position to fund our own growth?
CHATTERLEY: I'm sort of trying to read between the lines there, does that mean, you're in the Emmanuel Macron camp, perhaps of less reliance on the
United States particularly should make that comparison between sort of growth outlooks between the Eurozone and the United States and
acknowledging and recognizing the fact that China is a vital trade partner and will continue to be so.
DONOHOE: Yes, I'm not sure those kinds of trade-offs are implicit in what I'm saying. I mean, we're here in the heart of Washington and the U.S. at
the moment, oh, they're very much are. And the essence of politics and economic policy is to make trade-offs.
CHATTERLEY: Right.
DONOHOE: I am so committed to global trade I believe the last time we were all at a time of war. We're all at a time in which multilateral cooperation
was beginning to decline between the World Wars of a century ago. A huge mistake was made and moving away from multilateral collaboration in
allowing world trade to begin to decline and fragment.
I believe we need to avoid that happening. I believe we need to deepen our trading relationships with U.S. and with China. But I also believe that as
we are doing that, we do need to build up the resilience of Europe, we do need to deepen our own economic foundations to therefore be economic
relationships that are growing, but also mutually beneficial.
CHATTERLEY: If we compare where the Eurozone is today versus 12 months ago, and the fear and the consequences of what the war would mean. Are you so
more optimistic about the outlook, certainly today than you were perhaps a year ago? I just wonder whether in the Eurogroup meetings that you hold
whether the end of the war is discussed, whether more sanctions on Russia are discussed, because at the crux of all the challenges is this short term
issue that persists?
DONOHOE: So just to deal with your two questions there?
CHATTERLEY: Yes.
DONOHOE: Yes, I am more optimistic. If I look at where we are now, within the euro area, if I look at the tone of these meetings here. As you say,
just over a year ago, the question everybody was posing to us is recession is an obstacle plan will have happened actually, with economic growth of
nearly 3.5 percent this year.
And even though our growth expectation for this year is less than 1 percent, it's still growth. So I am more optimistic. But that then leads
into your excellent second point, then, which is so much of our economic outlook continues to be contingent on what happens with regard to the war.
But leaving aside the economics of all of that there are some things that matter more. And what is more is Ukraine winning, what matters more is
repelling their invasion, which they're suffering from, because ultimately, if the values and principles that are at stake, there are fragments and are
weakened.
The political, ethical, not to mention the economic consequences of that, in the long run, will be so negative and so big. So we're in our economic
discussions, the focus is still an unambiguous standby the people of Ukraine have the right sanctions in place and fund them while they're
dealing with this law.
CHATTERLEY: Makes sense. Very quickly, I cannot have you here and not ask you about President Biden's presence. Of course in Ireland while you're
here in the U.S. in Washington, D.C., you're smiling. He's already said a few times I think that he might stay. He loves it that much clearly.
DONOHOE: I think he will be very, very welcome.
CHATTERLEY: OK.
DONOHOE: But I think there'd be lots of people in American Washington that will want him back. But it's been a hugely successful -- and what he is
underscoring is the value of what the U.S., Europe and the U.K. achieved in the Good Friday Agreement. How much it has done and bring violence to an
end? But how much more it could still do but he could obviously be very welcome. He won't if he wants to make a longer weekend for us.
CHATTERLEY: More of a longer term stay.
DONOHOE: Thank you very much.
CHATTERLEY: Paschal Donohoe, great to have you on. Thank you Eurogroup President speaking that. All right, more "First Move" live from the
International Monetary Fund at headquarters coming up Mohamed El-Erian joins us next. Much more to discuss. Stay with us.
[09:15:00]
CHATTERLEY: Welcome back to the world, I was going to say the World Economic Forum no wrong place the International Monetary Fund at Spring
Meetings here for a special edition of "First Move", where the real world remains front and center too. And bank earnings in the United States,
certainly front and center to give us a sense of what the outlook is from some of these banks and their concerns going forward too.
And I have to say I've just been looking through some of the numbers and resiliency for some of the largest banks in the United States is the
watchword, JP Morgan, Wells Fargo and Citigroup all reporting better than expected results. JP Morgan also boosting its outlook for net interest
income, that's a key source of revenue.
Thanks to strong depositor inflows they of course have benefited from some of the outflows that we've seen from the smaller banks. The key is what
pressure the Regional Banks will face and what they say in their upcoming results. But clearly, there's much to discuss. And I'm pleased to say
Allianz and Gramercy Adviser, Mohamed El-Erian joins us now. Great to have you in person.
MOHAMED EL-ERIAN, ADVISER OF ALLIANZ AND GRAMERCY FUNDS: Thanks for having me.
CHATTERLEY: I'm just talking -- a while. What do you make of the sentiment here? We can bring it around and talk about credit risk and some of the
banks but I think the tone coming into here was perhaps far more negative than the conversations that I'm having here. Is that your sense too,
uncertainties high tone better?
EL-ERIAN: I think that's photograph capturing.
CHATTERLEY: Yes.
EL-ERIAN: I think we came in much gloomier and people are starting to realize that we do have issues. There are uncertainties, but it's not all
gloom and doom.
CHATTERLEY: What are you looking for? As we push out throughout the rest of the year, and we can talk about the financial sector, we can talk about the
debt metrics in emerging markets. We can talk about the need to tackle some of the bigger issues. We've still got the war in Ukraine. I can make a
whole list of them. What's key still for you?
EL-ERIAN: So I think we have three issues. One is how do we grow and grow inclusively, meaning also, how do we deal with our supply issues? We have a
problem of supply and demand, issue number one. Issue number two is how do we deal with inequality?
And then issue number three, which has to do with the banks is not how to the big banks, how do the smaller banks and how to the levered institutions
get used to a mishandle interest rate cycle? And that's going to be a key issue.
CHATTERLEY: We've just had in the past week inflation numbers. We've now got inflation in the United States of what 5 percent core inflation
admittedly a bit higher than that. If you're the Federal Reserve now, we're so how do you handle this?
Do you say look, we just lie to people and say, look, this is better than we perhaps had hoped? It's still going to come down. We're still going to
focus on that, but don't crush the economy so much that you break things now with more interest rate hikes.
EL-ERIAN: So the fundamental issue is that we have an inflation target of 2 percent.
CHATTERLEY: Yes.
EL-ERIAN: That is not built for today's world. It's built for yesterday's world. So if you try to get the 2 percent you will crush the economy. So
you have a few choices. One is you have crushed economy, which I think is wrong choice.
[09:20:00]
Two, is to change your target, you can't do that when you've missed it. Three is you do exactly what you said.
CHATTERLEY: Yes.
EL-ERIAN: Tell people we'll get to 2 percent somewhere down the world and see whether we can live with 4 percent stable inflation. And that will be
the right choice. It's not a perfect choice, but when you are so late in reacting, and then you've had to front load, because you've been so late,
you end up in the world of second best.
CHATTERLEY: Is second best still avoiding recession? Or do you still think that's a likely a greater than like a potential?
EL-ERIAN: So I think your probability has gone up, but I do not think it's a done deal.
CHATTERLEY: No.
EL-ERIAN: I mean this economy is incredibly resilient and it has surprised on the upside over and over again. Now we get more policy mistakes, yes, we
go into recession, there's no doubt about that. But on its own, this economy does not need to go into recession.
CHATTERLEY: That's going to have to be a reconciliation moment, though; too, between what we're seeing in the stock markets, what we're seeing in
the bond markets, to your point about what investors in the bond markets are saying about where rate hikes and then rate cuts are going versus what
the Federal Reserve is saying. How does all that sort of wash out?
EL-ERIAN: That's a -- you have three big differences. One is between what the Fed is telling us about where interest rates are going to go, and what
the market is telling us. The market says -- 4 percentage points lower than what the Fed is telling us. I've never seen something like that.
The second one from what Fed staff is telling us and what Fed leadership is telling us that I've never seen before. And then third, what the bond
market is telling us and what the equity markets telling us. So we're going to have to reconcile these three things in the months ahead.
CHATTERLEY: The other thing I think that we're talking about here at the International Monetary Fund, get it right this time. I think, the outliers,
China, India, and the growth new ban that we're seeing, as we build a global picture of what the coming months looks like. Are we perhaps even
now under estimating the growth impulse that we get from those parts of the world?
EL-ERIAN: You know it's very hard to be a good house and a challenge neighborhood.
CHATTERLEY: Yes.
EL-ERIAN: So I think China and India will certainly outperform with 5 percent growth rates 4.5, 5 percent. I do think they are going to be the
engine of growth. But the question is can they sustain it if the rest of the global economy doesn't come up with better growth policies? And the one
issue we need to discuss over and over again is how do we generate inclusive economic growth?
CHATTERLEY: Right, I mean, this is, let's talk about this, because this is vitally important. And this is at the heart, I think of the broader
discussions that the IMF for the Spring Meetings and that is, to your point in advanced economies, a low growth environment and the policies that are
required to boost that.
But also that there needs to be some kind of debt suspension, some allowance for some of the poorest nations in the world that they're not
already in debt distress or approaching it. And they have to make tough spending decisions too on some of the bigger issues like climate transition
and finance.
It's the two policy choices and directions that we need to be pushing for and at a time of geopolitical fragmentation. Can we come together to make
the right choices collectively?
EL-ERIAN: I hope so, but it's been really slow.
CHATTERLEY: Yes.
EL-ERIAN: You should have come together two years ago, three years ago on the debt of the low income countries. And what's happening now is for those
countries that haven't fallen into default. They are redirecting money from the social sectors, from health, from education, from things that really
matter, in terms of long term wellbeing, to paying debts that are going to be rescheduled anyway.
We have to find a way to have a preemptive and orderly rescheduling. Unfortunately, the IMF, the World Bank, have been working very hard on
this, but they haven't been able to get the countries to agree.
CHATTERLEY: I mean, one of the big sticking points, and I don't really want to point fingers, but unfortunately, we have to. One of the biggest
creditors in the world is China. And we sort of learned in particular over the last few months that they don't want to be told what to do by big
institutions, by other nations, whoever they are.
Quite frankly, how do you bring them as the largest private creditor in the world to many of these nations to the table and help them accept that
something's got to give?
EL-ERIAN: So they're slowly coming to the table?
CHATTERLEY: Are they?
EL-ERIAN: Yes, I think they're slowly coming to the table they're recognizing but China has a point that we have to address, which is that we
continue to govern the system in a way that made sense after the Second World War, and in a way that doesn't acknowledge enough the changes.
And that is, what they're doing is actually they're creating different institutions and different approaches. And they've had bilateral agreements
with countries that have been completely outside. And of course, they've built other institutions that replicate what's being done.
So if we're not careful, China will continue to build little pipes around the core of the system. And that will fragment the global economy more.
CHATTERLEY: And those agreements have to be honored too and accepted by longer existing institutions that perhaps have a tendency to ride
roughshod.
EL-ERIAN: Correct. Absolutely.
CHATTERLEY: Yes. Can we get there?
EL-ERIAN: It's been too slow, but I hope we can get them because the alternative is much worse.
CHATTERLEY: I agree. Give us a reason to be optimistic.
EL-ERIAN: Well, there's many reasons to be optimistic. We've recognized the importance of economic growth.
[09:25:00]
We've recognized the importance of climate transition and the importance of the environment. We've recognized how public-private partnerships can work
the vaccine was an amazing public-private partnerships. There's lots of reasons to be optimistic, we just have to stop making mistakes.
CHATTERLEY: Yes, is that the biggest risk we still face even today, policymakers--
EL-ERIAN: We have a mindset. OK, that hasn't adjusted to the new realities.
CHATTERLEY: Yes, time to wake up and smell the coffee -- Mohamed El-Erian, great to chat to you.
EL-ERIAN: Thank you so much.
CHATTERLEY: Thank you so much for joining us always a pleasure. Now as we were just discussing their debt dynamics for emerging markets a crucial
part of the discussions here. Coming up after this we're going to be speaking to the World Bank President this has been a focus of his for many
years.
We're going to discuss what progress, what's holding nations back like China but more of course and what more can be done. Stay with "First Move",
we'll back after this.
(COMMERCIAL BREAK)
CHATTERLEY: A warm welcome back to "First Move", live from the International Monetary Fund headquarters in Washington D.C. First let me
bring you up to speed with some of the headlines that we're watching around the world. A low ranking U.S. Air National Guardsmen will appear in court
soon accused of leaking classified military secrets.
The FBI arrested 21-year-old Jack Teixeira on Thursday. He's moved to be the leader of an online chat group where the documents were posted. And to
Israel now where police clashed with Palestinians gathered near the Al-Aqsa Mosque in Jerusalem. Video obtained by CNN shows police using stun grenades
early Friday.
It's unclear what sparked the confrontation. Last week, two police raids were carried out on the grounds of site revert in both Islam and Judaism.
And U.S. President Joe Biden on the final day of his trip in Ireland. No politics on the agenda today is exploring his Irish heritage as he wraps up
a three-day visit to his ancestral homeland.
[09:30:00]
And you can see him waving, smiling there as he steps off Air Force One arriving in NOC. And Donie O'Sullivan joins us now. Donie, what can you
tell us about the NOC shrine, Donie, I want all the history how exciting.
DONIE O'SULLIVAN, CNN CORRESPONDENT: Your test, you're testing my Irish Catholicism here.
CHATTERLEY: Of course.
O'SULLIVAN: We are here in County Mayo. Just down the road is the NOC shrine where Biden I believe is just arriving at. It's the main Catholic
train in Ireland, an apparition local say in 1879, of Jesus, Mary and John. And since then, it has, you know, the most sacred place in Ireland, in the
Catholic faith, so very significant that he is going there.
After that he's going to be talking to, and actually as we're looking, as we're just here, there's a White House helicopter going over our heads. Not
sure if that's him or not. Then he's going to be speaking to some genealogists about his links to Mayo, his great, great, great grandfather,
Edward Blewitt actually grew up on this street.
And his ancestral home is just here at was just here behind me. And then tonight, he's going to come here to Ballina. For really what is the main
events of this visit a spectacular setting down by the river Moy outside a cathedral, and he's going to address what is expected to be thousands of
people, we're already seeing hundreds of people lining up here already so, a lot of excitement for the great, great, great grandson of Ballina to come
home.
CHATTERLEY: Donie, I'm still laughing, and I'm so mean, I'm very impressed by your knowledge of that. I was expecting you not to say anything, quite
frankly, talk about that ancestral home no to because the other thing I read was that he's actually going to be given a brick of his ancestral home
apparently tell me he looks so at home there. Let's be clear. He spent three days looking very comfortable.
O'SULLIVAN: Yes. Yes. So, you know, there is we were actually shown by the person who now owns the property where the ancestral home used to be on
that there is a wall which they claim as part of that original home. So, I believe that is a piece of that wall is going to be gifted to him. I will
say, in our days, I hear a lot of people making a lot of different connections to Biden, I'm not entirely sure.
Everybody who's claiming to be his cousin might actually be related to him or not. But we certainly know that the Blue had family here in Ballina, who
we've spoken to, over the past few days in the past few weeks, they have a very close connection with the president. They were actually some of them
were over in the White House on St. Patrick's Day, just last month. And so that reunion here it is, it's a very genuine connection he has with this
town.
CHATTERLEY: Yes, I was going to ask you, Donie, whether there are people that are claiming some connection to him that, quite frankly, don't have a
connection, but I think you answered that question for me. Yes, lots of relations there currently.
O'SULLIVAN: There's, there's a lot of that going on. But look, I mean, I think that's part of the fun of it. There is an incredible atmosphere here.
I mean, obviously, President Biden has a lot of stuff going on at home a lot of problems, of course, the intelligence leaks, and he's even joked
this week that he wished, wishes he could stay in Ireland a bit longer.
So, you know, JFK, President Kennedy began this tradition 60 years ago, of coming to Ireland. He was, of course, the first Catholic President of the
United States, Joe Biden is the second. He came here 60 years ago started this tradition of tracing Irish roots. And since then, many, several U.S.
presidents have come back, Nixon, Reagan, and Obama. But people here are saying that Biden is the most Irish of all the American presidents.
CHATTERLEY: Yes. And I think you made us a great point, which is I think he perhaps rather be there than back home right now. So, I think there's going
to be some good party tonight. And Donie, great to have you with us! Thank you so much. And thank you so much, as always for bearing with me. A
minority questions we'll speak soon, thank you.
All right, we're going to take a break here on "First Move". But still ahead, as we were discussing with Mohamed El-Erian, a desperately needed
solution for debt sustainability across the poor nations how a talk does this week go? What more needs to be done? David Malpass, World Bank
President joins us next stay with CNN.
(COMMERCIAL BREAK)
[09:35:00]
CHATTERLEY: Welcome back to "First Move" live from the International Monetary Fund and World Bank Spring Meetings here in Washington DC and
actually where a historic global sovereign debt roundtable has been taking place. It's a subject that we've spoken about many times with the World
Bank president here on "First Move".
This is the first of its kind meeting to bring both public and private creditors together to help give emphasis and importance to debt
restructuring relief to help some of the poorest nations in the world. Finding a solution is something that the entire world needs to care about.
The World Bank says developing nations will be unable to find trillions of dollars they need to combat big issues like climate change if these debt
burdens and sustaining repaying these debts remain too high. I'm pleased to say World Bank President David Malpass joins us now on the show.
Fantastic to have you great to see you in person as well! I think there are two big themes here. For the advanced nations, the growth is too low. And
that needs to be reinforced and measures need to be taken to boost that.
But also, for the poor nations, they need some debt relief. I know this is something that you've been working on now for years. Talk to me about the
sovereign debt roundtable, there was some progress. But you're also disappointed that more wasn't done, talk to me through.
DAVID MALPASS, WORLD BANK GROUP PRESIDENT: That's right. And the amounts of money are really important to countries that are poor. And so, from the
global standpoint, they're not large, and it should be solved. For the poor countries, it's an immense problem. It's much more money going out than
what they get in development assistance.
And so that means there's a net negative flow from the world that's part of this global harsh environment for developing countries. They're getting
crowded out of global markets in general. And the debt crisis is one part of that. So, we had the roundtable, I've been setting working to get this
set up for a time.
And it brings together as you said, and it's important to bring, it brings together debtors and also a broad range of creditors. That previous
processes had been exclusive, there were narrow, and they didn't, for example, let the debtor country be in the room when their fate was being
discussed.
So, we had everyone there two days ago, it was successful in the sense that everyone is well meaning and that they want to share information earlier in
the process. That's important. There was discussion of the need for timelines so that there can actually be some sense that of progress being
made.
But from the standpoint of actually getting it done, then it comes down to what are the next steps for Ethiopia, for Zambia, for Ghana and in that
regard that we're watching day by day, hoping for progress from the creditors' committees that have been set up on those countries.
[09:40:00]
CHATTERLEY: Let's talk about China, we have to because they're the largest private creditor, and there are a whole host of issues here. And you've
touched upon one of them, I think, which is transparency and information sharing and a lot of the deals that have been signed and the loans that
have been provided.
There's non-disclosure agreements attached to them, but the details are to a pain. Did you make any progress and even trying to have an understanding
what those terms are, and understanding perhaps how they can be in some way adjusted? What was the reaction when you mentioned the word suspension,
perhaps?
MALPASS: Country by country, we are trying to have reconciliation of the amounts owed that gets inside these contracts. There was mentioned at the
roundtable, that perhaps the borrowing country who is under the effect of the non-disclosure clause, could itself share the contracts with the world
so that other creditors could see what they were getting into within a debt restructuring. Because if one group of creditors has undisclosed terms in
their contract, how can you form a comparable deal?
CHATTERLEY: You can't.
MALPASS: You can't. And so, as we, as we look at that, that's one avenue to be explored. Quite a few of these, we are, we're I'm pushing hard to set up
a workshop in May, which would bring together technical aspects of these teams.
We work closely with the IMF with the G20 to get an open discussion of debt suspension, is that a possibility for those countries that wanted. If
you're a debtor country, right now, you have no recourse; you go into the common framework, right now with the worry that it may take two years
before people even meet.
CHATTERLEY: And getting investment during that time is impossible. And this is the other point that you're making at the beginning. We need investment
into these countries; they need to produce climate finance, adaption finance, if they're locked out of financial markets, if they're just
burdened by debt repayment that freezes. This is a crucial part of this too.
MALPASS: Exactly. Right, there's urgency to this because the amount of money needed by the countries for their own development for climate
adaptation, which is, which is an ever-present concern in the countries. Those are massive amounts of money. But at present, there's not the capital
inflow from the advanced economies.
And in fact, the debt payments are, are really drawing down their international reserves and weakening their currencies. So that shows up as
inflation for the poor in those countries. So, the urgency is clear. The question is, for example, for Zambia, they're going to have a meeting in a
week or so with their creditor committee.
And the hope is that there'll be a restructuring deal. This has been going on for two years. So, it's time to actually write down what the
restructuring deal would be. And for China to agree to recognize that it's in China's interest to really get this moving along. The private sector has
said that, that it would be better for the private sector to have predictability.
Just tell me what the future is, because then I can invest either in that country or in other countries, China's should come to that same recognition
that this is actually a good way out of these debt amounts. They aren't large from China's standpoint, but they're very large for the countries.
CHATTERLEY: Yes. And he's trying to onboard with that, because we are in a situation now, I think, and it's the sort of final question on this, where
China is making it very clear that they don't want to be told what to do by another nation's government by a body, an institution like the IMF or by
the World Bank that was started in a different part of the world and operates differently. Can we bypass all of that?
MALPASS: I'm trying; we're trying hard not to tell them what to do, but to show them that there are benefits to them in, in going in this direction
and getting it resolved. Clearly, some parts of China are on board with doing that. But the actual creditors, if you think about on whose balance
sheet are these loans inside China, there's China Exim Bank, there's China Development Bank, these are entities that protect their balance sheets.
So there needs to be some top-down discussion in China of look, their losses have been occurred in the past. We want to work through them and
move forward. And so that will be a way to go.
CHATTERLEY: It would be a constructive way one of the other topics of discussion that I get asked, and it's critical to what we're seeing in the
war in Ukraine, the data that the IMF that the World Bank is providing is whether or not we can trust the data and the forecasts about Russia,
whether or not on where you get that data from.
[09:45:00]
Because if it's provided by the Russian government, how do we believe it, quite frankly, where does the data come from? And how much can we trust it?
MALPASS: There is a desire by these big institutions to put out forecasts on each country. But as we can imagine, the quality of the data differs
substantially by country. There's an effort to verify from other sources. But the reality is there's not very much in terms of double checking of
data, for example, on Russia.
You know, we had that experience in the past in the Soviet Union, there were they were they were putting out data that was way bigger than their
actual GDP. It was kind of pretend, remember, the communist mantra was, we pretend to pay you and you pretend to work, which meant that the actual GDP
was way below what the projected, or what the data showed.
CHATTERLEY: Is it fair to say we could be in a similar situation today, where the projections are far better for the Russian economy? The suffering
of the Russian economy could be far greater as a result of the sanctions than is portrayed by your own estimates, because as you're saying, their
best guesses basically.
MALPASS: That's right. And I think life is hard in Russia, because they're excluded from traveling to many parts of the world. They're, they've seen
their supply chains have to change dramatically.
CHATTERLEY: Brain drain.
MALPASS: Which creates brain drain shortages, young people moving out of Russia, because they don't want to be a part of the war? So, the GDP
numbers are not capturing the reality of the horror of this war. In Ukraine, there's better data because people are daily engaged in the
receipts and in the payments. So, it's showing a really harsh hit on the people of Ukraine as well.
CHATTERLEY: David, final question. Couple more months here at the World Bank, I know you have many things that you're interested in, as we've
discussed, debt talks are an ongoing progression. Any regrets? What are you excited about? I know you've got a busy two months before you leave. But
what's the game plan?
MALPASS: I just came from a panel on sustainable finance. It's really interesting from a market standpoint, because markets have to adjust and
figure out how they're going to participate in global public goods. That's one interesting future topic. I think, for me what I wanted to do on day
one coming in, was have everyone recognize the goal is better outcomes, good outcomes for people in developing countries.
That's a focus mission. And so all of our work through crisis after crisis, the massive work by World Bank staff to get huge surge, two surges in
finance done in for COVID. And now for the inflation food crisis that's going on, I've been very proud of that.
And it gives, you know, a path for the future that you have to have some institutions that can react quickly, and have management that really gets
engaged in the World Bank team has been awesome.
CHATTERLEY: Yes. I think that's the message. The team has been awesome. David, great to chat to you as always! Thank you so much.
MALPASS: Sure, thanks.
CHATTERLEY: The World Bank President there, certainly not slowing down. OK, we're going to take a break. Coming up after this, Richard Quest joins us.
We'll discuss the talk here at the IMF, stay with us.
(COMMERCIAL BREAK)
[09:50:00]
CHATTERLEY: Welcome back to "First Move". Let me give you a look at how markets, stock markets are trading in the United States. We are 20 minutes
into the session. Of course, it is the beginning really, of earnings season. And we've heard from some of the biggest banks in the United
States, JP Morgan Wells Fargo, Citigroup all reporting better than expected results.
As we were discussing earlier on the show though the big banks have benefited, I think from some of the broader uncertainty that we've seen,
what we really want to hear is what the smaller banks are saying. We also got some U.S. retail sales numbers falling at 1 percent last month. You'd
expect that in light to think again of the banking sector volatility that we saw in Silicon Valley Banks collapsed.
The question is what happened here on out the U.S. retail sales, no shortage of things to discuss, of course, and I'm very excited to say.
Richard Quest joins me now. Richard, you are a celebrity here at the International Military Bank. This only handshaking and yes, I feel
practically invisible.
RICHARD QUEST, CNN EDITOR-AT-LARGE: No -- I'm not going to go there. Look, there was a demonstration outside the IMF and World Bank, it happens every
year, in some shape or form. But they're getting more sophisticated. They've worked out a way to stop the traffic without actually stopping the
traffic.
I mean, in the sense of they now had a band this morning, a man playing an instrument that was outside the IMF. And you can see, and this major
thoroughfare right through Washington, there is no traffic moving in any direction. And all it takes is one person to do it.
CHATTERLEY: That's fantastic.
QUEST: Cancel the debt is the message. That's what they're saying, cancel the debt, which as you have been talking about with the president of the
World Bank of this, it's going to be the sleeping, the sleeping ticking time bomb, so that's a --.
CHATTERLEY: No, it's a perfect metaphor, quite frankly, we've got two stories, we've got low growth in the richest nations, they need to do
reform policy to boost growth. And then we need to allow some of the emerging market developing nations, leaving room to take decisions.
QUEST: The key is this higher for longer, if it's higher, for longer, that's going to punish the developing nations even more.
CHATTERLEY: Debt or interest rates, or both?
QUEST: Well look, both absolutely.
CHATTERLEY: Yes, this is the key.
QUEST: They will have to renew debt. And corporations, by the way, will be facing exactly the same problems when they come to roll over their
corporate debt and bonds so, this higher for longer to beat inflation, because they messed it up the first time.
CHATTERLEY: Yes.
QUEST: Will be the big problem.
CHATTERLEY: And actually, that's part of the crux of what the IMF said, coming into this, that interest rates will have to go back down again, very
quickly once the inflation is handled simply because that sustainability metric, well, oh, my goodness, that's -- activated.
QUEST: Not at the core inflation numbers. Just look at them.
CHATTERLEY: Higher in the United States.
QUEST: Exactly.
CHATTERLEY: Yes. Mohamed El Erian though said to us earlier about the inflation thing that actually policymakers just have to lie to us. And say
that we're heading back towards target but understanding that those low inflation numbers are from the past.
QUEST: But that will create an interesting thing, because the markets won't be full, but they'll choose to look the other way. So, the moment the
market hears that maybe 3 percent or three and a half percent is an acceptable number, even though it breaches the pivot idea.
CHATTERLEY: The market thinks the Feds going to cut rates Richard.
QUEST: If they cut rates before the end of the year, I will buy you dinner in the restaurant of your choice.
CHATTERLEY: Really? What if they don't though, we're still buying you dinner, just we see lastly.
QUEST: Of course, I still buy you dinner. But it'll be the restaurant of my choice.
CHATTERLEY: Oh, OK. I think we'll probably agree on that. Tell you what, we're smiling. And I do think this is an important point to make about
these Spring Meetings, because there was a sort of doom and gloom, I think, from the headline and the deep uncertainty, but the story and the message
I've really been getting is that we could have been in a far worse position today. The U.S. economy is resilient. China's reopened; you're stronger
than could have been expected.
QUEST: Yes, we are rowing the boat now, doing the hard work of getting where we need to go. And it's just tragic. But it's not as bad as it could
have been. It's spring, the tulips around outside.
CHATTERLEY: Yes, they are. The protesters are out with their musical interlude.
[09:55:00]
But tough decisions still have to be made and high uncertainty. More work to be done, Richard. You're back with the Quest Means Business later on.
I'm out to do a panel.
QUEST: I -- do my pop in, do a bit of broadcasting.
CHATTERLEY: Oh fantastic. Thank you. And then we'll go get dinner. You're paying. That's it from "First Move" here. At the International Monetary
Fund and World Bank Spring Meetings, which is back later as he mentioned? Thank you for watching. "Connect the World" is up next, we'll see you soon.
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