Rubin v Europe

Doug Henwood dhenwood at panix.com
Wed Apr 28 12:11:58 PDT 1999


Financial Times - April 28 1999

RUBIN: Seeking to limit Europe's influence By Robert Chote, Economics Editor, in Washington

Robert Rubin, US Treasury secretary, yesterday said it was time to consider realigning the constituencies within which countries were grouped at the International Monetary Fund, a move that would see Europe lose influence in the global economic watchdog.

Speaking at the IMF's "interim committee" of finance ministers and central bankers, he also sounded a note of caution on the world economy, warning: "The balance of risks remains on the downside." It was important that Europe redouble its efforts to increase domestic demand.

Mr Rubin said his proposal to reshuffle the political representatives on the IMF's governing bodies "takes into account the changing dynamics of the world economy and provides an appropriate voice, in particular, for emerging market economies".

The IMF's 183 member countries are grouped into 24 constituencies, each providing an executive director on the IMF board and a member of the interim committee. At present European countries have eight of the 24 seats, far in excess of their importance in the world economy.

Mr Rubin's suggestion was swiftly opposed by Hans Eichel, Germany's finance minister. He said that emerging market countries could be given a greater role "without altering the present structure of the constituencies". But French officials said that some rejigging could be considered.

Mr Rubin's move reflects long-standing US frustration at Europe's over-representation in the international financial institutions. Grouping the European countries in a smaller number of constituencies would not affect their voting power but, as most Fund decisions are reached by consensus, many officials regard the number of chairs as more important.

Meanwhile, Mr Rubin rejected France's proposal to convert the interim committee into the formal decision-making "council" envisaged in the IMF's articles of agreement. "Instead I think we should take steps to make our discussions more open and frank - aimed at building consensus rather than making speeches."

Kiichi Miyazawa, Japan's finance minister, said he would be prepared to support the creation of the council, which "may be the optimal solution". But there would have to be more balanced representation of emerging market economies.

Officials pointed out that the realignment of IMF constituencies had been ruled out when the new "quotas", or shareholdings, in the Fund were agreed in 1997.

The committee also discussed how better to involve the financial sector in crisis resolution. Mr Rubin opposed creation of a "heavy-handed vehicle" to allow the Fund to effect payment standstills in crisis countries. Dominique Strauss-Kahn, French finance minister, urged a "supple and pragmatic approach".



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