Brussels, 02/12/2005 (Agence Europe) - What is the best reform for an International Monetary Fund (IMF) which is experiencing a crisis of legitimacy? This was the question raised on Tuesday by MEPs on the economic and monetary committee of the Parliament, at a hearing of experts held in preparation for the report by French Socialist Benoît Hamon, on the strategic re-examination process started by the Bretton Woods institutions. This report, which is to be debated at the plenary of February 2006, pleads for the European Union to have a single seat at the IMF, an objective already announced under the Austrian Presidency at the European Council of Vienna in 1998, but which has since been lost sight of. Mr Hamon regrets the absence of any notable progress towards better coordination of European positions, stating that the forthcoming Austrian Presidency could lead from the front on this. As this issue relates to that of the EU's representation in other international organisations, the President of the Eurogroup, Jean-Claude Juncker, is also said to be interested in this initiative, Mr Hamon explained to a small group of journalists.
"The only thing worth noting is that the system does not work well", observed Ngaire Woods, a professor at Oxford University, during the debate, adding that the IMF is an "anachronistic and redundant" institution. This observation was tempered slightly by the self-assessment procedure initiated by the IMF, which was welcomed by those who took the floor during the debate, but of which they hope for more than the initial beginnings of reform. Hoping that the Fund will be able to accomplish the mission it was set up for, which is to "divide up the benefits of globalisation" (it takes the view that globalisation was, in fact, complete in 1910, with economies which had previously been highly open folding in on themselves), Ms Woods criticised the " schoolmaster role" played by the IMF and the total lack of any analyses carried out by the IMF of the social impact of financial crises. This position was broadly shared by Mario Cafiero, member of the Argentinian Congress, who had used graphics and statistics to demonstrate the blatant limitations of IMF intervention in his country between 1976 in 2003. "The flight of capital was multiplied severalfold, debt exploded, unemployment increased and GNI dropped", this was the result of the Fund's policy, said Mr Cafiero, lamenting the fact that the flight of capital was equal to Argentinian public debt. The judgement voiced by Hetty Kovach of Eurodad, a network of NGOs active in the field of development, was also critical of the IMF. Several of these elements will be included in the Hamon report, which calls, amongst other things, for the governance of the IMF to be improved. This can be done by such means as more regular dialogue with the national parliaments, or the creation of an ad hoc working group within the European Parliament on questions related to the Bretton Woods institutions. A case was made, in particular, for the IMF to focus more on its origin activities and the prevention and monitoring of financial crises, whereas it has gradually become more involved in the whole spectrum of public policies, exceeding the strict framework of maintaining international financial stability. This has had the result of reducing the role of other specialist international organisations (ILO, WHO, UNDP, UNCED), whose expertise far outstrips that of the Fund on these subjects, said Benoît Hamon during the debate. "Our recommendations reflect the policies which the countries in question should have put into place before the crisis", but were diverted from so doing, partly because they were "politically delicate", saidAgustin Carstens, Deputy Director-General of the IMF, in defence of his organisation, and went on to list the main elements of the reform underway at the IMF. The Fund is to solve the problem of the quotas and voting rights of its members, Mr Carstens also noted, adding that any " a priori formula should be excluded", even "if certain countries will win and others will lose out". Under the current system, the United States, with 17.11% of the votes, have a de facto right of veto for the most important decisions, Mr Hamon observed, explaining that if the EU was a member of the IMF on its own right, it would have 31.92% of the votes. With a single seat, the number of votes for the EU would, however, be lower, as they would then have to exclude intra-Community trade from the calculation of its economic weight, Mr Hamon explained, calling for a gradual increase in coordination among the countries of the EU within the IMF, in order to end up with a single representation. The reticence of the Member States whose weight at the IMF is "disproportionately large compared to their economic weight" (Belgium and the Netherlands) and of"those with a constituency" (France and the United Kingdom) remains to be overcome, the rapporteur warned. Jean-Louis Bourlanges (ALDE, France), rapporteur for the opinion of the committee on International trade, took position in favour of a "single electoral college for the EU" at the IMF which, he said, "still has progress to make to achieve a parallel with the WTO".