Pressure is building on European countries to seriously consider forming a single voice within the IMF after the financial institution decided to give more say to emerging economic powers, experts said.
Advocates of reform have long noted that small European countries like Belgium, the Netherlands and Sweden enjoy a proportionately much bigger say than large developing countries like Brazil, China and India.
Economist Jean Pisani-Ferry, the head of the Brussels-based think-tank BRUEGEL, said that European countries would do better by accepting to pool their votes in the International Monetary Fund now, rather than having a more difficult deal forced on them later.
"If the Europeans try to buy time, reform will be imposed on them," he said. "Instead, they should seize the initiative and try to get a good bargain from the others," Pisani-Ferry added.
IMF directors recently agreed to overhaul the institution to give more influence to developing countries, reflecting the shifting balance of power in the global economy.
Under the plan, China, South Korea, Turkey and Mexico will see immediate increases in their voting rights as part of a broader two-year program of reform, IMF managing director Rodrigo Rato said Friday in Tokyo. Despite its growing stature as a global economic powerhouse, China has less voting power than Belgium and the Netherlands combined.
Rato announced a new formula for quotas in Tokyo on Friday which would be based on the size of a country's economy and its openness, although the exact parameters have yet to be decided.
The quotas determine how much a member contributes to the Fund, its voting rights and access to financing, which currently totals 28 billion dollars in loans outstanding to 74 countries.
Likewise, Pisani-Ferry said that unlike the United States, "Europe stands out for its lack of leadership and its incapacity to take on global responsibility".
The Belgian source said that current pressure on some small countries to surrender influence had eclipsed the real problem of "how the IMF functions, its board of directors, the power of the G7 (richest countries) and one particular dominating country", referring to the United States.
Although decisions rarely have to be made by vote at the IMF, when it comes to that, the United States enjoys a veto.
Washington has a 17.5 percent quota, which is enough to make or break decisions since they require at least 85 percent of the vote among IMF members.
The only way for Europe to make up for an unavoidable reduction in the voting rights of its individual members would be to speak with one voice. Together the voting rights of the European Union's 25 members are currently above 32 percent. "This is not sustainable", said Pisani-Ferry. "There needs to be a deep reflection about this subject in Europe", especially on account of current difficulties of co-ordinating positions among European nations within the IMF, the Belgian source said.
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