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Towards unified representation for the euro area within the IMF

02-07-2019

Looking back on 20 years of the euro, it is widely acknowledged that it has proved successful as the common currency of the euro area, and that it has also developed into a vehicle for international trade, having become the second most widely used currency in the world. However, this growing international role is not reflected in the external representation of the euro in international financial fora, notably the International Monetary Fund (IMF). Over the years, various attempts have been made to ...

Looking back on 20 years of the euro, it is widely acknowledged that it has proved successful as the common currency of the euro area, and that it has also developed into a vehicle for international trade, having become the second most widely used currency in the world. However, this growing international role is not reflected in the external representation of the euro in international financial fora, notably the International Monetary Fund (IMF). Over the years, various attempts have been made to change this. The latest of these attempts came in the wake of the Five Presidents' Report of 2015, which subsequently led to a Commission proposal for a Council decision on unified representation of the euro area in the IMF. The proposal aims to secure representation of the euro area on the IMF's Executive Board through the creation of a single euro-area constituency, and by the Eurogroup in the remaining IMF bodies. Member States have shown reluctance to give up the current form of representation on the IMF Executive Board in favour of a unified euro-area constituency. Their objections are mainly geopolitical in nature. They tend to consider that their national interest is best served in the framework of the existing IMF governance structure. Although the proposal has been on Council's table since 2015, there has been no visible progress to date, with the 2025 implementation deadline proposed by the Commission now called into question.

The International Monetary Fund: 15th General Review of Quotas

03-04-2019

The International Monetary Fund (IMF) is set to engage in a quota review which is likely to have important institutional, economic and political consequences. Quotas are an essential component of the governance structure of the IMF, defining the influence member countries exert in the decision-making processes, their financial commitments and access to financing in case of need. The 15th review is likely to revolve around two key issues: overall sufficiency of IMF resources and redistribution of ...

The International Monetary Fund (IMF) is set to engage in a quota review which is likely to have important institutional, economic and political consequences. Quotas are an essential component of the governance structure of the IMF, defining the influence member countries exert in the decision-making processes, their financial commitments and access to financing in case of need. The 15th review is likely to revolve around two key issues: overall sufficiency of IMF resources and redistribution of quota shares between countries. This paper, prepared by Policy department A, aims to provide a general description of the quota system and the current state of play of the review. It also discusses the dimension of parliamentary scrutiny.

IMF World Economic Outlook reflects consensus views

15-01-2019

This briefing is provided by Policy Department A following the participation of the Members of the European Parliament's Committee on Economic and Monetary Affairs (ECON) in the Annual Meetings of the Boards of Governors of the International Monetary Fund (IMF) and the World Bank (WB) Group in Indonesia on 8-14 October 2018.

This briefing is provided by Policy Department A following the participation of the Members of the European Parliament's Committee on Economic and Monetary Affairs (ECON) in the Annual Meetings of the Boards of Governors of the International Monetary Fund (IMF) and the World Bank (WB) Group in Indonesia on 8-14 October 2018.

Debt Sustainability Assessments: The state of the art

15-11-2018

The approach to Debt Sustainability Assessments (DSAs) has substantially evolved after the global crisis, consistent with the goal of improving detection of high and low frequency risks. DSAs cover an increasing number of indicators, systematically look into implicit and contingent liabilities, and use statistical methods to quantify “tail events”. They also operationalize debt limits, by adopting thresholds for debt and payment flows to single out enhanced vulnerability. While these developments ...

The approach to Debt Sustainability Assessments (DSAs) has substantially evolved after the global crisis, consistent with the goal of improving detection of high and low frequency risks. DSAs cover an increasing number of indicators, systematically look into implicit and contingent liabilities, and use statistical methods to quantify “tail events”. They also operationalize debt limits, by adopting thresholds for debt and payment flows to single out enhanced vulnerability. While these developments mark true progress, this paper focuses on liquidity risk, contagion risk and the identification of debt limits as critical areas limiting DSA effectiveness, explains why DSA should embed potentially available official support and how an incomplete lending architecture is a hurdle for DSA. The paper concludes with a comparative assessment of current standard DSAs, suggests directions for further improvement and discusses the correct use of DSAs in light of the strengths and weaknesses inherent in the underlying methodologies..

Autore esterno

Giancarlo Corsetti

Debt Sustainability Assessments: The state of the art

14-11-2018

Autore esterno

Cinzia ALCIDI and Daniel GROS

The ESM and the IMF: comparison of the main features

27-04-2018

This document provides a comparison of the main objectives, tools and governance structures of the European Stability Mechanism (ESM) and of the International Monetary Fund (IMF). It contributes to the debate on recent proposal regarding the possible evolution of the ESM into a “European Monetary Fund”, in the wider context of the discussions on how to strengthen the governance of Economic and Monetary Union. The note also presents summaries of three external papers prepared in spring 2017, upon ...

This document provides a comparison of the main objectives, tools and governance structures of the European Stability Mechanism (ESM) and of the International Monetary Fund (IMF). It contributes to the debate on recent proposal regarding the possible evolution of the ESM into a “European Monetary Fund”, in the wider context of the discussions on how to strengthen the governance of Economic and Monetary Union. The note also presents summaries of three external papers prepared in spring 2017, upon a request of the Economic and Monetary Committee on this subject.

An evolutionary path for a European Monetary Fund?

31-08-2017

The ECON Committee requested the opinion of three external experts on the possible set up of a ‘European Monetary Fund’. This note provides the general background and summarizes the experts’ contributions.

The ECON Committee requested the opinion of three external experts on the possible set up of a ‘European Monetary Fund’. This note provides the general background and summarizes the experts’ contributions.

The future of multilateralism: Crisis or opportunity?

10-05-2017

Multilateralism lies at the core of the EU’s identity and of its engagement with the world. Both the 2003 European Security Strategy and the 2016 Global Strategy emphasised the importance of a rules-based global order with multilateralism as its key principle and the United Nations (UN) at its core, and made its promotion part of the EU’s strategic goals. Yet, in spite of widespread acknowledgement of the achievements of the multilateral international order established after the Second World War, ...

Multilateralism lies at the core of the EU’s identity and of its engagement with the world. Both the 2003 European Security Strategy and the 2016 Global Strategy emphasised the importance of a rules-based global order with multilateralism as its key principle and the United Nations (UN) at its core, and made its promotion part of the EU’s strategic goals. Yet, in spite of widespread acknowledgement of the achievements of the multilateral international order established after the Second World War, and in particular of the attainment of long-lasting peace, multilateral institutions and the liberal international order in which they are embedded have recently been the subject of severe criticism. The rise of populist nationalism has been interpreted, among other things, as a crisis in support for the multilateral order. Some of the causes of this crisis are related to the emergence of new actors in the global scene, the expansive nature of multilateral institutions, the widening gap between publics and international institutions and the decline of American power. The election of Donald Trump, who had repeatedly questioned the value of multilateral organisations such as the UN, North Atlantic Treaty Organization (NATO) and the World Trade Organization (WTO), has led to even greater preoccupation about the future of global governance. In this scenario, several scholars suggest that the EU and the G20 should be proactive in safeguarding multilateralism, while acknowledging and promoting the necessary reforms to the architecture of global governance.

An evolutionary path towards a European Monetary Fund?

03-05-2017

There is no need for Europe to replicate the International Monetary Fund (IMF). The European Stability Mechanism (ESM) can provide the backstop for sovereigns, even without a financial contribution from the IMF. In this sense, the ESM already constitutes to a large extent a ‘European Monetary Fund’. Other IMF functions such as surveillance and policy coordination should remain with the European Commission, the Eurogroup and other existing bodies. The ESM will be called upon to act as a backstop only ...

There is no need for Europe to replicate the International Monetary Fund (IMF). The European Stability Mechanism (ESM) can provide the backstop for sovereigns, even without a financial contribution from the IMF. In this sense, the ESM already constitutes to a large extent a ‘European Monetary Fund’. Other IMF functions such as surveillance and policy coordination should remain with the European Commission, the Eurogroup and other existing bodies. The ESM will be called upon to act as a backstop only intermittently, in times of great financial market instability. The need for it will evolve as a function of the nature of financial markets and their cross-border integration. It is not possible to forecast with any precision when the next financial crisis might break out and what form it will take. Any evolution in the functioning of the ESM should thus aim at enhancing flexibility and clarity of its overall mandate (financial stability), rather than revising the details of the rescue mechanism (which should be extended to the Single Resolution Fund) and its modus operandi. Moreover, the ESM should be viewed as the natural instrument for unifying the euro area’s representation in the IMF.

Autore esterno

Daniel Gros (Centre for European Policy Studies)

A European Monetary Fund?

03-05-2017

The creation of a European Monetary Fund seems a natural next step to improve upon the European Stability Mechanism. This paper argues that such a step is neither necessary nor desirable, for many reasons. First, the European Stability Mechanism is a fundamental contradiction with the no-bailout rule, which is arguably the most crucial instrument to foster fiscal discipline in the Eurozone. Second, any insurance mechanism creates moral hazard. A European Monetary Fund would be deeply immersed in ...

The creation of a European Monetary Fund seems a natural next step to improve upon the European Stability Mechanism. This paper argues that such a step is neither necessary nor desirable, for many reasons. First, the European Stability Mechanism is a fundamental contradiction with the no-bailout rule, which is arguably the most crucial instrument to foster fiscal discipline in the Eurozone. Second, any insurance mechanism creates moral hazard. A European Monetary Fund would be deeply immersed in conflicts of interest among its members. Third, it would have to fit in alongside the Commission and the Eurosystem, already in charge of monitoring the Eurozone countries, preventing crises, lending in last resort and developing debt-restructuring principles. Fourth, it would need a highly competent staff to deal with crises but idle in quiet times. Fifth, its governance should guarantee fast action when needed, with proper accountability and undue politicisation. These are serious hurdles and the IMF can perform the task.

Autore esterno

Charles Wyplosz

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