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Wednesday 22.11.2017 | Name days: Aldis, Alfons, Aldris

Struggle for influence could paralyze IMF work

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The clash for influence between countries threatens to paralyse the work of International Monetary Fund (IMF), if US and Europe are not able to reach an agreement on how to pass on greater influence to growing economies in the nearest future.

LETA reports that US wants Europe to transfer part of their seats in 24 members board of IMF to developing market economies; thus, reflecting their growing impact on the global economy.

However, Europe avoids taking a decision on giving away nine of its seats, because there is a prevailing disagreement among countries on how to do it.

Both parties have to reach an agreement till October 31st, when the current IMF board mandate ends.

«If the solution is not found in time, IMF will become crisis-ridden, » said a high-ranking chairperson of the board.

Washington, discontented with European hesitation to hand down part of its power, took another unprecedented step on August 6th, blocking a resolution that could have allowed Europe to maintain the dominant position in the IMF board.

This US step also reveals a more serious economic disagreement with Europe on the new global liquidity conditions of banks, and on Europe’s way of tackling financial austerity measures. Washington insists on the necessity to ensure economic recovery before belt tightening.

US Finance Ministry pointed out that the appointment of the new board of IMF is a good opportunity to carry out reforms in fund management, and that Europe has to take subsequent steps.

The high-ranking European Union (EU) official admitted that there are talks about giving a greater impact to the growing economies, yet the question remains – how much of it should be given.

EU representative could not give an answer on whether the financial ministers of EU states will address this issue in the meeting due on September 6-7th.

The US and EU dominant position in IMF board reflects the post-war economic order, which has changed along with the economical growth of such countries as China.

The IMF board is one of the funds highest decision-making institutions, which was responsible for approval of assistance programmes, worth billions of dollars, to rescue countries that faced difficulties such as Latvia, Greece, Romania and Ukraine.

The IMF board members warn that, if the compromise will not be achieved sooner than October 31st, the administrated four seats of India, Brazil, Argentina and Rwanda will be cancelled, because these countries have the smallest quota shares.

On the other hand, if Europe gives in, small EU nations, like Belgium, the Netherlands and Scandinavia might lose their seats.


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