OeNB Seminar

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Main Messages 

There is a need to improve governance, both of the globalization process and in the International Financial Institutions that are becoming important instruments of governance in the world economy. 

The European Union must fully play its destined role in the governance of the world economy. The European Convention on the Future of Europe, and the European Constitution, must provide a clear, solid framework for the actions of the Union and its member states in the international monetary and financial domain, and to achieve their unified representation in international financial institutions and conferences. 

When the EU Member States adopted a common currency, a common monetary and exchange rate policy, and the management of members’ external reserves by the European System of Central Banks, and gave the European Community the exclusive right to regulate international flows of funds, they irrevocably transferred essential parts of their monetary sovereignty in the international legal order to the European Union. This action has made the European Union competent and responsible for complying with the most important commitments of its member states under the IMF’s Articles of Agreement. 

The common approach to the representation of the EU in the IMF can be achieved by two methods: common action by the EU Member States whose currency is the euro, or alternatively, by making the European Union itself a member of the IMF. 

In the absence of membership status for the European Union, its representation in the IMF has been achieved??I might better say replaced??by some degree of concerted action on the part of its member states or their representatives in the decision?making bodies of the IMF. This coordination of action has largely been informal and accomplished ex post, which is to say that common actions are being pursued if member countries, together with the Commission and the ECB are able to reach common understandings or common views on issues affecting the EU or EMU. 

Although rather informal, this cooperation represents meaningful progress towards a better representation of the EU within the IMF. Some significant shortcoming should be noted. 

These shortcomings suggest that we should seek progress towards a situation where the Euro area expresses common views in the international monetary and financial sphere. 

A new feature of the draft European Constitution is a newly drafted article III?81, replacing Article 111 (4) of the EC Treaty. In some respects this provision represents progress; in other respects it may be seen as regressive. 

For now, the Union seems to be relying on continued strong involvement of those Member States who are committed to defending and promoting common positions. 

But the new constitution gives the Council the power to decide, when the political will emerges, backed by a normal majority, to support a "unified representation." What this "unified representation" implies is deliberately left vague. But I understand that it may include membership of the European Union in the IMF, with a single Executive Director appointed or elected by the European Union, or if they continue to participate in the IMF, by the EU Member States. 

Once the Council begins to use this new power, all Member States would have to cooperate in order to remove the remaining external obstacles to this "unified representation." This may include amending the Fund’s Articles of Agreement, or, as some have suggested, an appropriate reinterpretation of the term "country" for the purposes of Article II, section 2. 

The establishment of a unified EU representation would constitute a historical departure for both the EU and the IMF, raising significant issues affecting the governance of the IMF and the internal functioning of the Union.