Global Policy Forum

US Upbeat on IMF Quota Deal,


By Stella Dawson

January 28, 2006

The United States is very optimistic it can reach a deal to give emerging Asia more say in the International Monetary Fund, but Europe insists that Washington gives up some power, officials said on Saturday.

After talks with Group of Seven deputies at the World Economic Forum in Davos, U.S. Treasury Under Secretary Timothy Adams said that financial policymakers are making progress on talks over reforming the IMF's voting structure. "I am very optimistic," he said. "The U.S. agrees that the IMF should evolve."

Emerging Asia, particularly China and India which now rank among the world's largest economies as Europe's role fades, are pressing for a larger say in the fund's governance. Reform is expected be high on the agenda of the IMF's spring meeting in Washington, as it reviews its role in a globalised economy where developing nations have more weight. But changing the voting structure is contentious. It threatens to diminish Europe's dominant role in the 60-year old institution, which was designed to police the world economy and provide emergency aide when countries faced cash crises.

One suggestion is to consolidate the Europe Union into one seat to make room for Asian countries. Also under discussion is changing the weightings of votes, which are linked to the amount of money that each country contributes, known as quotas. But European Central Bank President Jean-Claude Trichet said Europeans wants "fairness" -- code for saying that it will insist that if Europe gives up power through a change in quotas, then the United States give some ground too.

"A reduction in quotas would not be fair," Trichet said. As for a single European seat, he said that while the ECB Governing Council does not have a position on the issue, it currently sees limited politicial integration in Europe as an obstacle. "At this stage, clearly the sentiment of my colleagues is that it will not fit with the present political framework of the European Union," Trichet said. But he held out hope for future change, saying: "But again, this is a process."

Adams gave no details of what type of IMF deal was under discussion among G7 officials, though monetary officials here expressed confidence a plan would be ready in time for the September annual meeting in September. IMF Managing Director Rodrigo Rato has consistently said in recent months that emerging markets especially in Asia, which play a bigger role in the world economy than 15 years ago, need better representation, a view he repeated again at sessions here in Davos.

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