ECONOMY

Eurozone ministers to debate desirability of single IMF seat

BRUSSELS – Eurozone finance ministers will discuss on Monday whether the bloc should have a single seat on global economic bodies, such as the IMF, with its largest member states giving up their right to separate representation. On a more immediate level, they will also look at why economic recovery in the euro area is slow. The 12 eurozone countries are now represented in the International Monetary Fund, the G7, G8 and G20 groups of nations by combinations of the Eurogroup chairman, the European Central Bank, the European Commission and the current European Union presidency, which changes every six months. The eurozone’s two biggest economies, Germany and France, and European Union member Britain also have national representatives in the IMF and other international forums; they do not have similar positions on all major issues. «The current framework is seen as complex while not ensuring the euro area an appropriate weight and visibility,» a paper prepared for the meeting by the Economic and Financial Committee of junior finance ministers showed. «It results in a situation of under-influence of euro area member states and the euro area as such, while at the same time Europe is being criticized for being over-represented,» the paper, obtained by Reuters, said. No decision on the sensitive issue is expected on Monday. A single representative of the eurozone or the European Union would force greater coordination of views and policies among eurozone members, which could prove a mixed blessing if such coordination could not be reached in time, the paper said. It noted the process of moving toward a simplified representation of the eurozone or the EU would be long and hinge on how the representative and his office would be chosen and how policy on major issues would be coordinated. «A single EU/euro area seat would have less voting power than all the combined votes of EU countries now,» European Central Bank board member Lorenzo Bini Smaghi wrote in a paper on IMF reform in September. But he pointed out that the EU did not act as a coalition at present anyhow. «The main issue is whether a single EU/euro area seat has more power to form coalitions than the current situation,» Bini Smaghi wrote. «Together with the United States, a unified European seat would be a significant player, despite the considerable drop in voting rights…» «In view of the longer-term relative trends in GDP growth… unless the EU/euro area countries improve their coordination… and probably move to a unified seat, they will progressively lose power,» Bini Smaghi said. The ministers should also discuss if they would like a representative from the Commission to formally participate at meetings of the G20 group of countries, the next of which starts on October 15, the EFC paper said. Turning to more immediate problems, the ministers will discuss why the economic recovery in the second half of this year is more subdued than during previous economic cycles and the evolution of the competitiveness of the euro area. They will talk about responses of some member states to high oil prices, like the French decision to grant tax breaks to farmers, and listen to the European Commission’s views on the recently presented 2006 French and Italian budgets. Expensive oil is one of the main reasons for the eurozone’s sharp slowdown in growth this year as it eats into households’ disposable incomes, compounding consumer reluctance to spend stemming from persistently high unemployment. The ministers from the 12 eurozone countries will meet in Luxembourg ahead of a meeting of all the EU’s 25 finance ministers on Tuesday.