Friday, October 1, 2010

The EU (Finally!) Cedes Some IMF Seats to the BRICs

. Friday, October 1, 2010

The EU is giving up some of its spots on the IMF board to emerging countries:

Germany, France and Britain have their own seats on the 24-member I.M.F. board, while Belgium, the Netherlands, Spain, Italy and Denmark represent groups of countries, or constituencies. Switzerland, although not part of the Union, also is represented, giving the Europeans a total of nine board positions.

The United States, frustrated at Europe’s refusal to share more I.M.F. power with emerging economies, moved in August to block plans that would have kept Europe’s long-running dominance over the board, which could end in the board being cut to 20 members.

“We agree to reduce advanced European representation by up to two, by offering rotation to emerging markets with advanced countries in their respective constituencies,” E.U. finance ministers wrote in a proposal agreed to on Friday. ...

The current Europe-U.S. domination of the fund is a reflection of its post-World War II setup, but the order is now being challenged by the rise of China and other emerging economies. The I.M.F. board is one of the global lender’s main decision-making bodies. It has approved billions of dollars in emergency loans for countries hit by the global financial crisis and oversees the way the fund is run.

The board overhaul would be linked to a quota shift of at least 5 percent to “dynamic emerging economies and developing countries” and a shift of at least 5 percent from the overrepresented to the underrepresented, the ministers said. ...

The changes would also end the longstanding informal deal that Europe nominates the managing director of the I.M.F. while the United States picks the head of the World Bank.

“The proposed compromise should be understood as a package and as providing a comprehensive and stable solution,” the ministers wrote in the document.

No surprise here. The more the BRICs are willing to contribute to institutions, the more say they'll get in how those funds are used. It should interest some to notice that the US is pushing against the EU for greater inclusion of the BRICs. Would that have been possible a few years ago? I don't think so. If the EU doesn't get its house in order it will continue to lose influence in the international arena.

I await the Vreelander's take on this.


The EU (Finally!) Cedes Some IMF Seats to the BRICs




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