Europeans urged to cede IMF votes

Rodrigo Rato, managing director of the International Monetary Fund, will meet EU finance ministers next week (7 November), to discuss plans to overhaul the voting structure of the lending institution.

The member states of the EU currently hold 32% of the votes at the IMF, which nowadays comprises 144 members, but they are under pressure to surrender some of their voting strength.

In September, the fund’s board of governors agreed on ad hoc increases in votes held by China, South Korea, Mexico and Turkey. But the move was criticised by other countries including India which worry that the IMF may now duck a more comprehensive and logical reform of voting rights.

IMF directors decided last year that voting rights should be extended to developing countries to reflect shifts in the balance of the global economy. But the reform programme, which is supposed to be completed in 2008, has already run into trouble.

Set up after the Second World War to foster exchange rate stability, the IMF went on to focus primarily on lending money to struggling economies, but its credibility as a global institution suffered over the years.

Long dominated by western economies such as the US, the IMF’s hawkish methods were criticised for doing more harm than good to fragile societies in developing countries.

Plans to reduce the disproportionate amount of votes held by developed economies will meet with resistance in Europe.

"In Europe, we are still in listening mode on this," said one diplomat from Finland which holds the presidency of the EU’s Council of Ministers. "All the member states are owners of the IMF."

EU member states are still unable to agree on acceptable criteria for the re-allocation of votes. "Some proposals have been directed towards the openness of economies, others, say, on strength of gross domestic product," said the diplomat.

Aurore Wanlin, research fellow at the Centre for European Reform, a think-tank, said: "There has been little progress on this issue for the past months. There has been a lack of political will."

Rodrigo Rato, managing director of the International Monetary Fund, will meet EU finance ministers next week (7 November), to discuss plans to overhaul the voting structure of the lending institution.