U.S. calls IMF too Eurocentric

Jean-Claude Trichet, left, European Central Bank chief, with Belgian Finance Minister Didier Reynders. (John Thys)

At one level, individual livelihoods are at stake, with European officials discussing who among them might be asked to give up their $248,000-a-year job. But in the IMF's peculiar version of geopolitics, it also affects how whole regions of the world will be represented.

Where the power lies

All 187 IMF member countries appoint a representative to the agency's board of governors, but that large body meets only occasionally and has limited influence over policies, management and lending decisions. Power largely rests with the much smaller executive board, whose two dozen members serve in Washington on a full-time basis.

Five nations were given permanent spots on the executive board when the fund was established after World War II, and that group has been largely unchanged - the United States, Germany, France, Britain and Japan. Three others, by virtue of their size or role in the global economy, send executive directors who represent their nation alone: China, Russia and Saudi Arabia.

The other 179 members compete for 16 remaining board seats in an internal election that forces them to build coalitions and choose who in the grouping will take the executive director's job. These "affinity groups," as IMF historian James Boughton calls them, often are based on shared traits such as geography or language.

But politics shapes the coalitions as well, allowing an Asian nation such as East Timor to be comfortably represented by Italy instead of being left in group that includes East Timor's former ruler, Indonesia.

Executive directors would not speak publicly about the issue, but several from Europe argued privately that the United States was disrupting a system that has worked reasonably well. While the board may not be representative on a global scale, directors argue that the existing system allowed the IMF to absorb dozens of new members in the early 1990s and accommodate a host of regional and political sensitivities.

If there are problems, they argue, they should be self-correcting. Countries could form different coalitions if they don't feel well represented, they say, and the IMF's formulas for distributing voting shares among countries should gradually reflect the growing clout of emerging-market nations - with no need to barter over the outcome of the internal elections.

To advocates for change, however, the outcome should be obvious.

"Major changes are underway in the global economy," with Asia leading the global recovery and both population and economic growth in Europe at tepid levels, said Amr Battacharya, director of the Group of 24, a coalition of finance ministers from developing countries. "The issue is where within the developed world should the adjustment take place, and when you look relative to the world economy - population, other indicators - the spotlight really is on Europe."