Forum Section: EU Representation and the Governance of the International Monetary Fund
| Date | 01 December 2005 |
| Published date | 01 December 2005 |
| Author | Géraldine Mahieu,Stéphane Rottier,Dirk Ooms |
| DOI | 10.1177/1465116505057820 |
| Subject Matter | Articles |
Forum Section
EU Representation and the
Governance of the
International Monetary Fund
Géraldine Mahieu
European Commission, Belgium
Dirk Ooms
National Bank of Belgium, Belgium
Stéphane Rottier
International Monetary Fund, USA
ABSTRACT
The introduction of the euro and closer coordination of
economic policies in the European Union are fuelling a
debate on Europe’s representation in the international finan-
cial institutions. A single EU representation at the Inter-
national Monetary Fund (IMF) would affect the balance of
power in the institution through a fundamental reallocation
of quotas and executive directors among its membership. A
reduction in the number of European executive directors,
and in the total voting power of Europe and in its contri-
bution to the Fund’s general resources, could go hand in
hand with an increase in the Union’s impact on IMF deci-
sion-making. Such a change would also weaken the coop-
erative nature of the Fund through a reduction in the number
and impact of mixed constituencies.
493
European Union Politics
DOI: 10.1177/1465116505057820
Volume 6 (4): 493–510
Copyright© 2005
SAGE Publications
London, Thousand Oaks CA,
New Delhi
KEY WORDS
balance of power
European Union
governance
IMF
voting power
Introduction
The introduction of the euro and the institutional strengthening of the
coordination of economic policies in the European Union (EU) are fuelling a
reflection on the representation of Europe in the international financial insti-
tutions. Both in Europe and elsewhere, calls are mounting for European
position taking and representation in international forums to be streamlined,
a process that could end in a single EU representation, as in the World Trade
Organization. The outcome is – at least in the view of many current member
states of the Union – a long-term objective of the EU.
In the light of the establishment of a single monetary policy, the question
of a single external EU representation is of particular relevance with regard
to the International Monetary Fund (IMF), which is at the core of the inter-
national financial system. Through its almost worldwide membership, the
surveillance it exerts over its members’ policies, and the assistance and condi-
tional emergency financing it provides, the Fund is a major instrument
contributing to macroeconomic and financial stability.
The establishment of a single EU representation would constitute a
historical change in the IMF membership, and would raise major governance
issues. Although this article focuses on these issues in relation to the IMF, it
also touches on ‘spillover effects’ for the governance of other international
financial institutions and forums.
These matters have to be approached within the perspective of the
ongoing, broad debate on the governance of the IMF. With the collapse of the
Bretton Woods system of fixed exchange rates in the early 1970s, the Fund
had lost its core function with regard to balance of payments crises, and
thereby also – in the eyes of many – its raison d’être. The institution has never-
theless returned to the foreground, in particular as an instrument for the
prevention and resolution of financial crises. However, since the succession
of crises in the 1990s, which were primarily capital account driven, the effec-
tiveness of the Fund’s surveillance and its governance have been increasingly
questioned. Basically, the Fund has been under criticism for being in-
sufficiently transparent, independent and accountable, as illustrated by De
Gregorio et al. (1999). The organization was able to react positively to many
of these reproaches, in particular increasing transparency.
It follows from the analysis developed in this article that the creation of
a single EU chair might affect two of the major ongoing controversies: the
excessive politicization of the Fund’s decision-making, and the unbalanced
representation of its members. First, critics point to the current dispropor-
tional influence of IMF staff on the one hand, and of the Group of Seven (G7)
on the other hand, on the Fund’s decision-making. The G7 countries are
European Union Politics 6(4)
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