Sir,

 

Fritz Fischerset an ambitious target for Europe when he called for a “grand design” for reforming the IMF, but it is one that the EU must meet.

 

The European Parliament has just adopted a resolution on the IMF strategic review on the basis of a report by my colleague Benoît Hamon (PES, France). The discussions that preceded his report clarified several features of the grand design that Fischer is calling for. Two of the topics addressed by the Hamon report are of particular relevance; Europe’s influence in IMF governance, and the fund’s missions.

 

It seems to me that when Fritz Fischer reflected on a reorganisation of the European representation to the IMF, and Europeans’ voting share within the IMF governing council, he neglected to consider the eurozone and its 12 European countries with a common currency. We in the European Parliament acknowledged in the Hamon report that there is a lack of coordination of the Community and eurozone, and that their representation is fragmented among several constituencies. We also insisted that the European positions in the EU representation within the IMF must be better coordinated, and called on the member states to work towards a single voting constituency - possibly starting as a euro constituency.

 

In other words, we have pointed to the obvious fact that there is a lack of coordination, and we have proposed a workable solution, which is that we should start coordinating better, at least among those countries that have already tied their destiny together in economic terms by adopting the euro. The 12 states in question desperately need more economic policy coordination at home, and it would be equally appropriate if they also coordinated their external representation to the IMF. To be realistic, the EU as a whole might follow later, but it would anyhow benefit immediately from better coordination inside the eurozone. This would also be a good way of achieving the international dimension of economic and monetary union (EMU).

 

Until now, eurozone member states have taken a “defensive advantage” from the existence of the euro to protect themselves from international currency crises. But they have not yet used this tool as an instrument to strengthen their influence in international fora, and notably inside the international financial institutions.

 

Our call for a new level of coordination is not just an academic exercise. It is crucial if we are to achieve our political goals of changing IMF policies to make the Bretton Woods Institutions’ work more productive, and to correct the fund’s neo-liberal bias.

 

There is a second point that is often forgotten; reforming the IMF also means giving thought to the nature of its missions. The aim of the Hamon report, as adopted by the Economic and Monetary Committee of the European Parliament, was not just to call for reform on the conditionality of aid. It also emphasized that “the aim of financial stability that forms part of the IMF’s mission is made more difficult by the lack of global and transparent attention paid to the process of standardisation directly affecting the financial markets”. Although voting in plenary did not follow the committee on this, I remain convinced that the world has engaged in a process of standardisation, particularly of accounting standards, yet there remains a serious lack of democratic control of the process. A reformed IMF ought to fill this gap.