The board, responsible for conducting the day-to-day business of the IMF, is composed of 24 directors appointed or elected by member countries or by groups of countries. Despite the EU comprising of a monetary union, it is not represented by a single seat.
Ahead of a meeting of EU finance ministers next Tuesday, when a senior eurozone source involved in its preparation was asked what result could be expected, he answered: "Nothing. I expect that the single European chair will be identified as a very long-term possible solution."
Germany, France and Britain have their own seats on the board, while EU members Belgium, the Netherlands, Spain, Italy and Denmark represent groups of countries. Switzerland, although not part of the EU, also has a chair.
The United States' unprecedented move last month to block plans that would have maintained Europe's long-running dominance over the 24-member board will be discussed. The US Senate has also voted to block use of its taxpayers' money for IMF rescues such as the bail-out of Greece.
"Nobody will give up their seat without a tremendous amount of pressure," the source said, however.
European Central Bank President Jean-Claude Trichet said on Thursday that Europe needed to speak with a united voice to ensure it retains its influence in the IMF. EU ministers agreed on the candidacy of Dominique Strauss-Kahn as managing director of the IMF in 2007, but are divided over how to proceed with reform of the institution.
According to the official, smaller European countries were more likely to lose their seats than bigger countries. Belgium, the Netherlands and Scandinavian countries have in the past expressed their opposition to reform as they would lose voting power, whilst Spain, Ireland and other rapidly growing countries in the bloc would have stood to benefit from reforms proposed as long ago as 2006 (EurActiv 31/08/06).
"It is obvious what will happen. It is always the question of the weakest link. It is unlikely that it will be Germany that will lose its seat, so by backward induction you can figure out who the weakest link is and who the second weakest link is," the source said.
Despite the emergence of new economic powerhouses not being reflected in IMF voting rights, according to the source "the first European position is to say, 'the number of seats that we have is fully deserved'".
Argentina is one of the developing countries that has pushed hardest for IMF reform and greater participation by emerging-market heavyweights.
"The Europeans are the ones who will have to reduce their participation. Right now, I believe that Belgium and China pay the same quota at the IMF. Obviously, this cannot be! If China is now the second-biggest global economy, it can't have the same representation as Belgium," said Nestor Stancanelli, part of Argentina's delegation in the Group of 20 Nations.
"The European Union is no longer just a customs union, it is also a monetary union, and it's not logical for the EU and individual European countries to all be represented. That's like the United States saying California and Texas must also have seats," he said.
A second source involved in the preparation of the EU finance ministers' meeting next week said the Europeans would all have to do something about the size of Europe's representation, but there was no agreement at this stage on who should do what and when.
Target 2 of Millennium Development Goal 8 agreed upon by all 189 United Nations member states in 2000 is to "develop an open, rule-based, predictable, non-discriminatory trading and financial system," something reform of the IMF's voting and financing mechanisms can help achieve.
(EurActiv with Reuters.)
