Eurozone Refuses to "Highlander" Its IMF Position

Anyone familiar with The Highlander fiction series knows its tagline: "There can be only one." Now, many EU countries have been criticized for having voting shares in the IMF that are larger than their respective GDP shares in the world economy. There are two ways to skin this cat. Giving a positive spin, some European countries claim this is their due for funding the organization since its inception; that is, after then cessation of WWII. In this version of events, "intergenerational justice" is served by taking account of IMF activity to the present time. Insofar as European countries have been historically active in lending at the institution, things are fine just as they are. For reasons I'm sure you're aware of, this position does not sit very well with LDCs.

The negative version, then, is of many LDCs emerging on the global economic scene that are generating a larger share of activity in the world economy still being treated like Little Leaguers at international financial institutions (IFIs). In other words, things are still quite white-man's-burdenish despite the emergence of new players like the BRICs countries Brazil, Russia, India, China...and others. It is in this context that the EU is deciding whether to consolidate its influence by folding all EU member shares in the IMF into a single position. (Ditto at the World Bank, etc.) Not only would doing so display unity, but it would also grant LDCs more shares. Reuters says that day may be far off as EU leaders have offloaded this discussion:

The European Union is not yet ready to have a single representation at international financial institutions despite being increasingly willing to speak with one voice, the chief of the bloc's executive arm said on Monday. "Are they ready for a single representation of the European Union? Honestly I don't think so," European Commission President Jose Manuel Barroso told a news conference ahead of a July 8-10 summit of leaders from the Group of Eight major countries. "Are they ready to have more coherent representation in those fora? I think probably yes," he added. He was responding to a question on whether the 27-nation EU should have a single seat at the International Monetary Fund.

Euro zone finance ministers are to discuss the issue late on Monday. Member states are reluctant to abandon their national seats at the IMF board and other forums such as the Group of Seven industrial countries, or the G8, which also includes Russia. EU countries also face pressure to lower their representation at the IMF to make more room for China and other emerging economies, which are playing an increasingly important role in financing the Fund.

Barroso reiterated the European Commission's view that the euro zone and the EU would not return after the crisis to their potential growth, or the highest expansion sustainable over the long term. The EU should post modest growth in 2010, he added...."We are not yet out of the crisis. We are no longer in free-fall, but we are still in negative territory until the end of this year," he said.

Barroso repeated calls for exit strategies from governments' fiscal stimulus programmes. "I think the solution is not to go on forever with expansionary policies ... The solution is to come back as soon as possible to normal public finances," he said.

Despite some epoch-making events, some things are simply too hard to let go. Eurocentrism dies hard.