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Voting Power implications of a Unified European Representation at the IMF

Dennis Leech and Robert Leech

 

CSGR Working Paper No. 156/05

 

Abstract

How should the European Union be represented at the IMF? Should EU members be separately represented as at present or should there be some form of combined representation? Greater economic and monetary cooperation within Europe, particularly in the Eurozone, means that separate representation is both unnecessary and gives Europe too much voting power: if they retained their present voting weight they would become dominant with very much greater voting power than the USA.

In this paper we examine some of the implications of the proposal to reform the voting system of the IMF by replacing EU members with a single representative of the European bloc. The voting weight of the EU bloc is reduced accordingly. We analyse two cases: the Eurozone of 12 countries and the European Union of 25. Using voting power analysis we show that the reform could be very beneficial for the governance of the IMF, enhancing the voting power of individual member countries as a consequence of two large countervailing voting blocs.

Specifically we analyse a range of possible EU voting weights and find the following for ordinary decisions requiring a simple majority: (1) All countries other than those of the EU and USA unambiguously gain power (measured absolutely or relatively); (2) The sum of powers of the EU bloc and USA is minimized when they have voting parity; (3) The power of every other non-EU member is maximized when the EU and USA have parity; (4) Each EU member could gain power - despite losing its seat and the reduction in EU voting weight - depending on the EU voting system that is adopted; (5) The USA loses voting power (both absolutely and relatively) over ordinary decisions but retains its unilateral veto over special majority (85%) decisions (as does the EU bloc).