The International (European) Monetary Fund?

9 October 2007

As yet another top post at the International Monetary Fund goes to a European, critics question the institution's committment to increasing the voice and representation of developing country constituencies in the Fund.

Italian economic minister, Tommaso Padoa-Schioppa, won the top post of the International Monetary and Financial Committee (IMFC) on 4th October. This posting marks the second European to secure a highly influential policy positions at the Fund. Last month, France's Dominique Strauss-Kahn was confirmed as the next IMF managing director beginning November 1.

Padoa-Schioppa, a former European Central Bank board member, was selected through a “highly secretive vote” among the 24-member IMFC, in a close run-off with Canadian finance minister Jim Flaherty, according to a Reuters article dated October 4. In previous weeks, this post was widely expected to go to Indian finance minister Palaniappan Chidambaram, which would have signified movement toward a more democratic power structure between developed and developing countries in the Fund. Padoa-Schioppa's selection thus closed off the most immediate chance that an emerging market country had to claim a position in the upper echelons of the IMF.

India lost its bid after an alliance of Anglo-African countries, led by Nigeria, came out in favor of the Italian candidate. Reasons for this move were not made public, according to IMF insiders, who also claimed that the move demonstrates deepening divisions between large developing countries (such as Brazil, China, India, and Russia) and low-income countries (especially in Africa), that still rely on the rich G-8 nations for aid.

The IMFC body is in essence the IMF’s “steering committee.” The membership reflects the composition of the IMF's Executive Board: each member country that appoints, and each group of member countries that elects, an Executive Director appoints a member of the IMFC. The IMFC carries significant policy-weight of its own, meeting twice a year to discuss the direction the IMF will follow.

With the sole exception of Canada, which briefly headed the IMFC in the 1980s, the top post, like the top post of the IMF itself, has always gone to a European. The IMFC’s previous leader was Britain’s Prime Minister Gordon Brown. In this round of IMFC chair selection, the Canadian candidate was supported by the U.S., Saudi Arabia, and Franco-African members of the IMF, while Italy was backed by European and Anglo-African countries. India’s bid for the IMFC post was propped up by large developing countries, including China, Brazil, and Russia.

Critics of the IMF are disappointed that despite the pledges of the new managing director, Dominique Strauss-Kahn, to increase voice and representation for developing country members, the Europeans continue to capture the top posts at the Fund. With the IMF already deep in the throes of a credibility crisis, the continued dominance of Europeans in high-level positions only intensifies the under-representation of developing countries at the Fund while maintaining the widespread perception among global critics of the IMF that it is a European-led club.

Resources

• Italy Finance minister wins key IMF policy post, by Lesley Wroughton, October 4, 2007 (Reuters website)
• India loses to Canada, Italy for IMF policy post, by Lesley Wroughton, October 1, 2007 (Reuters website)
• IMF’s Political Oversight: Padoa-Schioppa chosen as IMFC chairman, IMF Survey online, October 5, 2007 (IMF website)
• Yet another European for senior post at IMF: Italian takes position as chair of IMFC, Bretton Woods Project, October 5, 2007 (BWP website)