World finance leaders on Saturday agreed there was a “break in the clouds” of the economic storm but said more measures were needed to ensure an end to the global recession.
“We have serious problems. We are taking very serious measures, but things are beginning to look up,” said Youssef Boutros-Ghali, who chairs the IMF’s steering panel, the International Monetary and Financial Committee.
“Carefully, cautiously, we can say there is a break in the clouds,” said Boutros-Ghali, echoing the guarded optimism expressed a day earlier by the Group of Seven rich nations.
To ensure a recovery in 2010, an IMFC communiqué called for further action to restore the health of banks, revive lending and restart international capital flows. It urged countries to keep up fiscal stimulus and develop plans to exit from the extraordinary measures taken once recovery is established.
But the meeting of the IMFC appeared to make little progress in the thorny issue of giving emerging market countries a stronger voice in the global institution.
The communiqué said only that an upcoming review of members’ voting power will “result in increases in the quota shares of dynamic economies, particularly in the share of emerging market and developing countries as a whole.”
China and other developing economies say if they are to contribute money to the IMF, they need more influence -- an important caveat with the Fund still about $150 billion short of a $500 billion funding pledge from the Group of 20 rich and developing nations.
US AND EUROPE TUSSLE
The United States threw its weight behind the calls for greater representation for emerging economies. Treasury Secretary Timothy Geithner told the IMFC the time had come for the Fund’s governance to reflect the changing world.
“This is essential to strengthening the IMF’s legitimacy, ensuring that it remains at the center of the international monetary system and reflects the realities of the 21st century,” he said.
Geithner called for emerging nations to be given more voting shares, or quotas, in the IMF. He also suggested reducing the size of the Fund’s 24-member board to 22 by 2010 and to 20 by 2012, while preserving the number of seats for developing countries, thereby strengthening their hand.
This would come at a cost to western European nations, which currently occupy eight board seats and who, along with the United States, have long wielded power at the IMF.
Most of those countries pushed back against the US proposal on Saturday.
“I think for the moment the representation around the table is attractive,” Belgian Finance Minister Didier Reynders told Reuters. “The European countries are having to finance the Fund very strongly, so we have to take into account the size of each country’s participation in the Fund.”
The quota reform push comes at a critical time for the Fund, which is looking to reserve-rich emerging powerhouses like China for a greater contribution.
With much of the global economy in recession, and emerging markets under severe pressure as exports dry up, the IMF and other international lending institutions are facing a rising demand for loans.
“Crises are an appropriate time for learning what we did wrong and trying to avoid repeating the same mistakes. The IMF repented from many of its past sins. But it still has to address the original sin: its democratic deficit,” Brazilian Finance Minister Guido Mantega said. (Reuters)