Pressure grows for single euro seat at IMF

19th May 2008, Comments 0 comments

Pressure is growing on eurozone governments to cast their national interests to one side and give their shared currency a stronger voice on the global stage.

Brussels -- Pressure is growing on eurozone governments to cast their national interests to one side and give their shared currency a stronger voice on the global stage by seeking a single seat at the International Monetary Fund (IMF).

Calls to this effect were made last week by two of the euro's most influential figures while addressing an Economic Forum in Brussels celebrating 10 years of European Economic and Monetary Union (EMU).

"Our currency is the second most important in the world. Our policy decisions have a global impact and increasingly the euro area is helping to support the stability of the global economy and financial system," said Joaquin Almunia, the European Union commissioner in charge of economic and monetary affairs.

"The logical next step will be to consolidate our representation and obtain a single seat in international fora," he added.

Almunia's ambitions are backed by Jean-Claude Juncker, the influential chairman of the 15-member Eurogroup.

"In the long term, the eurozone will be represented in the IMF by one single seat," he said in his address to the forum participants, which include the finance ministers of France, the Netherlands and Spain as well as the president of the European Central Bank, Jean-Claude Trichet.

Calls of this kind are not new. But they are bound to resonate at a time of heightened financial instability and global economic slowdown.

While the euro has defied many critics to become an economic success story, most experts recognize that politically, it is still punching below its weight.

Many eurozone governments, for instance, frequently complain that China's yuan (renminbi) is unfairly undervalued, thus making Chinese imports cheaper and eurozone exports more expensive.

But as IMF chief Dominique Strauss-Kahn pointed out in Brussels, "the Chinese are rarely interested in the euro exchange rate," a direct consequence of the euro area lacking "the voice it should have."

As things stand, each of the 15 European countries that use the euro have individual representations at the IMF, an international organization that oversees the global financial system and which thus plays a key role in the global economic arena.

Such divisions mean that while the United States have strong voting powers, eurozone heavyweights Germany and France do not.

"It makes sense for the eurozone, which is run by a single central bank, to have a common representation at the IMF," said Philip Whyte, a senior research fellow at the London-based Centre for European Reform.

"Unfortunately, I do not see it happening any time soon," he told DPA.

Whyte argues that "political jealousy" and resistance to having a country's representation downgraded in international fora are likely to stand in the way of common sense for years to come.

Juncker, who also acts as Prime Minister of Luxembourg and is tipped by many to be offered a prestigious post within the European Union next year, hinted as much in his speech.

"Throughout the history of Europe, we have seen a battle between short term national interests and broader medium and long term objectives, and this kind of antagonism will continue," he said.

But euro member states will eventually understand that "the medium and long term benefits are greater than the short term costs," he added.

Juncker said future eurozone finance minister regularly speak in favor of a single representation at the IMF, only to backtrack once they assume office.

He then turned against what many experts identify as one of the greatest obstacles to eurozone unity: France.

"Mr (Nicolas) Sarkozy, also talked about a single representation in the IMF before he became president (of France). He still has four years (in office). I would encourage him to come back to this soon," he said.


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