Translated material
Fight without winners
Reforms have finally quarreled IMF shareholders
For the annual meeting of the Board of Governors of the International Monetary Fund, which took place over the weekend in Washington, Institutional Investor magazine featured a portrait of IMF head Dominique Strauss-Kahn on the cover under the headline “The Man Who Could Be President.” The theme of the continuing presidential ambitions of Strauss-Kahn, one of the most popular politicians in France, has been heard for a long time. With parties about to choose their candidates for the 2012 elections, now is the time to reaffirm those ambitions. Strauss-Kahn's main trump card could be success in reforming the IMF, giving new life to this organization. Success is still possible: apparently, at the November G20 summit, the reform will be approved, and Strauss-Kahn will be declared a triumphant. But there are serious problems with the real renewal of the IMF.The goal of the reform was to make the IMF more legitimate in the eyes of the developing world, to rid the fund of the image of an organization where the United States and the leading economies of the European Union are in charge. Strauss-Kahn's energetic energy and extensive political experience could help reboot the IMF. But instead, an unsympathetic squabble emerged over the redistribution of shareholder quotas in the IMF capital and international “currency wars” sharply intensified. In both cases, the role of the fund's top management did not contribute positively to the discussion.
From a calendar point of view, quota reform has entered a decisive stage - according to the decisions of the Pittsburgh G20 summit and the decisions of the IMF itself, it should be implemented by the beginning of 2011. Then it was decided to change the balance of power by transferring 5% of capital from developed economies to developing ones. First of all, European countries were supposed to “suffer”, China, Brazil and India were to gain (Russia’s quota roughly corresponds to its share in world GDP, so Moscow supports the reform for reasons of overall fairness). However, the Russian delegation says, the Europeans focused on the letter of Pittsburgh's decisions and completely forgot about their spirit. If we go by the letter, then, as Finance Minister Alexei Kudrin said, European negotiators suggest that developing countries be satisfied with a “shift” not of 5%, but of 2.5-3%.
According to members of the Russian delegation in Washington, Strauss-Kahn is intensively looking for a compromise. In recent weeks, the fund's board of directors twice discussed various options developed by IMF staff under its leadership, but none of them received support. Even attempts to split BRIC and offer an attractive scenario for, for example, Brazil, do not meet with enthusiasm among representatives of this country. Not to mention the fact that Europe does not approve of any additional compromises.
Participants in the Washington meetings admit that the G20 leaders will have to save the situation at the summit in Seoul in mid-November. Moreover, they will not be driven by good will and honest calculations, but by political necessity: the absence of a solution will mean the failure of the summit and the entire logic of joint G20 actions. However, both BRIC and the United States, dissatisfied with the uncompromising policies of the Europeans, understand that there is no particular need to rush to a solution: the further it goes, the more the EU’s share in the global economy will decline and the stronger the economic difficulties in Europe will be. Will this understanding translate into a willingness to sacrifice political expediency and fail the summit in Korea? This possibility should not be completely denied.
In any case, it is clear that the reform, the purpose of which was to strengthen confidence among IMF shareholders, has already led to the opposite result.
Even less conducive to increasing pressure are the tone taken by the US authorities regarding China's monetary policy and the IMF's dedicated readiness to maintain pressure on Beijing. Alexey Kudrin noted in Washington that the BRIC countries do not have an agreed position on actions in the foreign exchange market. Obviously, as an experienced participant in these debates (yesterday, by the way, Euromoney magazine declared him the best finance minister of the year), he would not want to unnecessarily politicize the discussion. But he emphasizes: the strengthening of the currencies of developing countries must be accompanied by a counter-movement in the monetary policy of developed countries. The problem of excessive capital flows to developing countries is global in nature, Mr. Kudrin said in an IMF statement, and its solution must be based on a global approach and a policy of coordination: “This means not only a greater willingness of developing countries to agree to strengthen their exchange rates , but also a more balanced monetary policy of the leading economies.”
But even in this case, there is a lack of trust, already for other reasons - Washington’s uncompromisingness. It would be unfair to blame the IMF for this, but perhaps a more balanced position, taking into account not only US interests, would help defuse the situation a little. But Dominique Strauss-Kahn did not go this route. Fierce infighting among IMF shareholders is also a result of his three-year leadership of the fund.