Emerging economies battle for more voting rights at IMF

Author: By Sarah Arnott

There was some progress at last week?s G20 meeting in Pittsburgh, but until
details are agreed, the balance of power between key economic players
remains unresolved. Under existing arrangements, the industrialised
countries hold 57 per cent of the IMF votes. But the financial crisis has
tilted control away from heavily indebted mature economies, such as the US
and the UK, in favour of the fast-growing, cash-rich, so-called ?Brics?
economies of Brazil, Russia, India and China.

The struggle for IMF voting rights has been rumbling for a decade, but
Friday?s G20 communique ostensibly agrees to a shift of at least 5 per cent,
which would take the split between developed and developing countries almost
even. Any sort of agreement at the G20 was quite a coup for Barack Obama,
but the question ofwhich Western powers will lose out looms large.

Given that the US is the only one of the IMF?s 186 member states with a power
of veto, based on a 17 per cent voting share, it has less to lose from
reform than its foot-dragging European colleagues. Britain and France are
particularly reluctant to endorse the changes, given that they could slip
below China in the pecking order if there are significant increases in
China?s quotas. They also stand to lose their permanent seats on the IMF
noard of governors, but pressure for an agreement is mounting.

The voting rights issue will also feature in the IMF summit?s wider debate
about global trade imbalances.

Slow-growing, highly indebted, trade deficit countries, including the US and
Britain, are trying to persuade major export economies such as China to
focus on boosting domestic demand, creating new markets for the laggards.

President Obama may hope the promise of a louder voice at the IMF will help
make the case.

Jean-Claude Trichet, the president of the European Central Bank, called this
weekend for more balanced trade flows. ?We know that these imbalances have
been at the roots of the present difficulties,?

Mr Trichet said. ?If we don?t correct them, we?ll have the recipe for the next
major crisis.

The Istanbul meeting will also see the publication of the IMF?s latest world
economic outlook report. A prereleased chapter of the report, which was
published last week, was downbeat on the prospects of speedy recovery.

Bank bonuses: Brown goes on the warpath

Laws to prevent a return to the “bad old days” of huge bank bonuses
will be introduced within weeks, the Prime Minister said yesterday.

On the first day of the Labour Party conference in Brighton, Gordon Brown
announced a new Business and Financial Services Act that will “ban the
old bonus systems” and give the Financial Services Authority powers to
intervene where banks flout tough new proposals on remuneration. “We
are going to clean up the system once and for all,” Mr Brown added.

The pledge came after world leaders at the G20 meeting in Pittsburgh agreed to
back new global standards for bankers’ remuneration and banks’ capital
ratios.

Mr Brown said that Britain’s proposals would be “the toughest action of
any country in the world”.

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