New Perspectives on EU-IMF Relations: a Step to Strengthen the EMU External Governance

Abstract

After many years of inactivity, the time has come to activate the external side of the EMU and surpass the time of pragmatic arrangements applied until now to the EU-IMF relationship. The economic crisis and the subsequent sovereign debt crisis in Europe have forced more transfers of competences from the EU countries to the EU institutions in the economic policy field, and this new dynamic in the European integration process provides a strong rationale for the EU and Euro area to reassess the external representation of the EU on EMU issues, including the participation in international institutions and fora and, in particular, in the IMF. Moreover, the implementation of the 2010 IMF reform after the US congressional approval will eliminate legal obstacles to a consolidation of the EU Member States’ constituencies in the IMF. To develop Art. 138 TFEU, the European Commission presented a proposal to enhance the Euro area representation in the IMF in October 2015. After a reshuffling of the current IMF constituencies with Euro area Member States, the pro-posal advocates EU mixed representation in the IMF (EU and their Member States) with a single chair for the Euro area in the IMF Executive Board from 2025.

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European Papers www.europeanpapers.eu ISSN 2499-8249
Vol. 1, 2016, No 2, pp. 469-499 doi: 10.15166/2499-8249/51
Articles
New Perspectives on EU-IMF Relations:
A Step to Strengthen
the EMU External Governance
Manuel Lopez-Escudero*
TABLE OF CONTENTS: I. Introduction. – II. Pragmatic arrangements in the EMU external governance. – II.1.
The legal and political obstacles against the external projection of the Euro area. – II.2. The pragmatic ar-
rangements: The EU in the IMF. – III. The impact of the 2010 IMF reform implementation on the EU. – III.1.
The EU representation in a renovated IMF Executive Board. – III.2. New quota assignments and the EU. –
IV. A single EU chair in the IMF? The 2015 Commission Proposal and the way forward. – IV.1. The EU
membership possibilities at the IMF. – IV.2. Improvement of the coordination of the EU Member States on
IMF issues. – IV.3. Euro area unified representation. – V. Conclusion.
ABSTRACT: After many years of inactivity, the time has come to activate the external side of the EMU
and surpass the time of pragmatic arrangements applied until now to the EU-IMF relationship. The
economic crisis and the subsequent sovereign debt crisis in Europe have forced more transfers of
competences from the EU countries to the EU institutions in the economic policy field, and this
new dynamic in the European integration process provides a strong rationale for the EU and Euro
area to reassess the external representation of the EU on EMU issues, including the participation in
international institutions and fora and, in particular, in the IMF. Moreover, the implementation of
the 2010 IMF reform after the US congressional approval will eliminate legal obstacles to a consoli-
dation of the EU Member States’ constituencies in the IMF. To develop Art. 138 TFEU, the European
Commission presented a proposal to enhance the Euro area representation in the IMF in October
2015. After a reshuffling of the current IMF constituencies with Euro area Member States, the pro-
posal advocates EU mixed representation in the IMF (EU and their Member States) with a single
chair for the Euro area in the IMF Executive Board from 2025.
KEYWORDS: EU external action – external representation of EMU – EU-IMF relationship – 2010 IMF
reform – EU single chair in the IMF – Art. 138 TFEU.
* Professor of Public International Law and European Union Law, University of Granada Law School
(Spain) and Legal Secretary at the Court of Justice of the European Union, manlopez@ugr.es.

470 Manuel Lopez-Escudero
I. Introduction
The Maastricht Treaty and then the Lisbon Treaty thoroughly regulate the internal as-
pects of the Economic and Monetary Union (EMU). In contrast, external representation
was extremely complex, and its regulation was very limited in the Maastricht Treaty (Art.
111 of the Treaty establishing the European Community – TEC) and the Treaty of Lisbon
maintains this line with minor modifications in Arts 138 and 219 TFEU.
As a result of the Great Recession and the subsequent European debt crisis, the EU
has reformed the internal economic governance of the EMU. Since 2010, European Un-
ion institutions have adopted many new EU secondary law rules and even intergovern-
mental treaties outside EU law to reinforce the internal governance of the economic leg
of the EMU. These new measures are the strengthening of the EU mechanism to coor-
dinate the national economic policies and the tightening of sanctions in case Member
States breach EU disciplines, the introduction of crisis resolution mechanisms to assist
Member States in crisis, and the transfer of responsibilities in banking supervision to
the EU institutions in order to achieve a banking union.1 In addition, the Euro area has a
single monetary and exchange rate policy.
The improvements that have been achieved on further internal integration of the
Euro area need to be projected externally and they should induce a change in the exter-
nal EMU governance and open the opportunity for a centralized representation of the
Euro area.2 It would be logical to equilibrate the internal and the external sides of the
EMU in order to allow the Euro area to play a more active role in international financial
institutions and to shape effectively its future role in the global financial architecture.
1 On the reforms in the European economic governance after the crisis, see generally F. ALLEMAND, F.
MARTUCCI, La nouvelle gouvernance économique européenne, in Cahiers de droit européen, 2012, pp. 1-100; P.
CHITI, J. TEIXEIRA, The Constitutional Implications of the European Responses to the Financial and Public Debt Cri-
sis, in Common Market Law Review, 2013, p. 683; O. CLERC, La gouvernance économique de l’Union européenne.
Recherches sur l’intégration par la différenciation, Brussels: Bruylant, 2012; A. HINAREJOS, Fiscal Federalism in
the European Union: Evolution and Future Choices for EMU, in Common Market Law Review, 2013, p. 621; D.
HODSON, Governing the Euro Area in Good Times & Bad, Oxford: Oxford University Press, 2011; J.P. KEPPENNE,
Institutional Report, in U. NEERGAARD, D. JACQUESON, O. DANIELSEN (eds), The Economic and Monetary Union: Con-
stitutional and Institutional Aspects of the Economic Governance within the EU. XXVI FIDE Congress in Copenha-
gen, 2014, Copenhagen: DJØF Publishing, 2014, p.179; R. LASTRA, J.V. LOUIS, European Economic and Monetary
Union: History, Trends, and Prospects, in Yearbook of European Law, 2013, pp. 4-5; K. LENAERTS, EMU and the
EU's Constitutional Framework, in European Law Review, 2014, p. 753; M. LÓPEZ-ESCUDERO, La nueva gobernanza
económica de la Unión Europea: ¿una auténtica union económica en formación?, in Revista de Derecho Comuni-
tario Europeo, 2015, p. 361; F. MARTUCCI, L'ordre économique et monétaire de l'Union européenne, Brussels:
Bruylant, 2016.
2 D. SCHWARZER, F. STEINBERG, D. VALIANTE, Towards A Common External Representation for the Eurozone?,
Madrid: Real Instituto Elcano, March 2013, p. 5; R. CHEMAIN, L’UE dans le système monétaire international, in
M. BENLOLO-CARABOT, U. CANDAS, D. CUJO, Union européenne et droit international, Paris: Pédone, 2013, p.
503.

New Perspectives on EU-IMF Relations: A Step to Strengthen the EMU External Governance 471
The external governance of the Euro area cannot continue to be the failed or the
forgotten component of the EMU. The price to pay for this weakness is too high: the Eu-
ro area does not have an influence or a leadership role in monetary and financial inter-
national relations commensurate to its economic weight and the position of the Euro as
the second international currency after the US dollar.3
More than 15 years after the implementation of the EMU, we have only pragmatic
arrangements to allow a scarce Euro area participation in the international financial or-
ganizations and fora. This regrettable situation could evolve in the coming months due
to two elements: the entry into force of the 2010 IMF reform and the process of com-
pleting the EMU. As the Five Presidents’ report of June 2015 underlines, in the way of
the completion of EMU perhaps the most difficult challenge will be the strength of its
external governance.4 The first step to reach this objective was the publication by
Commission in October 2015 of a Communication designing a road map for a more
consistent external representation of the Euro area5 and a Proposal for a Council Deci-
sion in order to unify progressively the Euro area representation in the International
Monetary Fund (IMF).6
Another event that opens new possibilities for the EU and Euro area to improve
their representation at the IMF is the approval of the 2010 IMF reform by US legislature
on December 2015. After five years of US veto, this reform will entry into force and it
contains relevant legal changes of the IMF Articles of Agreements that will facilitate the
consolidation of EU representation at the IMF.
Our aim is to analyse the legal questions raised by this necessary reinforcement of
the external economic governance of the Euro area. Our study will focus on the EU-IMF
relationship because the IMF is the most relevant and powerful international financial
organization and the EU participation in it is an essential part of the EMU external rela-
tions, and a litmus test for the actions of the member.
3 R. SMITS, International Representation of Europe in the Area of Economic and Monetary Union: Legal Is-
sues and Practice in the First Ten Years of the Euro, in Euredia, European Banking and Financial Law Journal,
2009, pp. 297-333. On the international role of the euro, see generally I. ANGELONI, A. BENASSY-QUÉRÉ, D.
CARTON, Z. DARVAS, E. PHEDESTRAIS, J. PISANI-FERRY, Global Currencies for Tomorrow: A European Perspective,
Brussels: Bruegel, 2011; D. COHEN, The Future of Global Currency. The Euro Versus the Dollar, New York: IIE,
2011; ECB, International Role of the Euro, Frankfurt: European Central Bank, 2013; M. LOPEZ-ESCUDERO, El
Euro en el Sistema Monetario International, Madrid: Tecnos, 2005; J. PISANY-FERRY, A. POSEN (eds), The Euro at
10: The Next Global Currency?, Brussels: Bruegel, 2009.
4 Five Presidents’ Report on Completing Europe’s Economic and Monetary Union, 22 June 2015,
ec.europa.eu.
5 Communication COM/2015/0602 final of 21 October 2015 from the Commission to the European
Parliament, the Council and the ECB on a roadmap for moving towards a more consistent external repre-
sentation of the euro area in international fora.
6 Commission proposal for a Council Decision laying down measures in view of progressively estab-
lishing unified representation of the euro area in the International Monetary Fund, COM(2015) 603 final.

472 Manuel Lopez-Escudero
First, I intend to explain the minimalist approach applied to IMF-EU relations since
the introduction of the single currency in 1999 and the pragmatic solutions put into
practice to take into account the Euro reality. Second, I will review the consequences for
EU-IMF relations of the implementation of the 2010 IMF reform, which comes into force
after US Congressional approval in December 2015. Third, I will analyse the Decision
Proposal introduced by the European Commission in October 2015 in order to achieve
a unified Euro area representation in the IMF by 2015. Finally, I will present some con-
clusions for developing better EU-IMF relations, useful also for better international eco-
nomic and financial governance.
II. Pragmatic Arrangements in the EMU External Governance
The original EU primary law included only one article as the express legal basis for the
external governance of EMU. This was Art. 111 TEC, which after the Lisbon Treaty be-
came Arts 138 and 219 TFEU.7 The last article regulates the EU competences to con-
clude international treaties on EMU matters and the single exchange rate policy of the
Euro area, which are elements of the EMU external relations not envisaged in our study.
Art. 111, para. 4, was the rule on EU participation in international financial organisation,
but it was always neutralised by the EU Member States.
In effect, the Commission submitted in 1998 a modest proposal for a Council deci-
sion on external representation8 calling for the Council, along with the Commission and
the European Central Bank (ECB), to represent the Community at the international level
in the context of the EMU. The Council could not agree on this proposal and, instead, it
submitted a report to the Vienna European Council, which adopted it, considering that a
pragmatic approach would be the most successful in minimizing the adaptation of the
international rules and practices.9 There were too many legal and political obstacles to
resolve and the wait- and- see tactic dominated this area of EU external action.
7 See J.V. LOUIS, The International Projection of the Euro and the International Monetary System, in M.
TELÒ (ed.), The European Union and Global Governance, London: Routledge, 2009, p. 74.
8 Commission proposal for a Council Decision on the Representation and Position Taking of the
Community at International Level in the context of Economic and Monetary Union, COM(1998) 637 final.
9 European Council Conclusions of 11-12 December 1998. See the comments from S. CAFARO, The
Missing Voice of the Euro. Legal, Technical and Political Obstacles to the External Representation of the Euro
Area, in Il Diritto dell’Unione europea, 2011, pp. 901-902; B. STEINKI, Competencies of the European Community
on International Monetary Fund Matters: an Overview of the Key Legal Issues, in IMF, Current Developments in
Monetary and Financial Law, Washington: IMF, 2003, p. 120.

New Perspectives on EU-IMF Relations: A Step to Strengthen the EMU External Governance 473
ii.1. The legal and political obstacles against the external projection of
the Euro area
The external relations of the EMU were and continue to be a field full of legal and politi-
cal obstacles. Some of these barriers have their origin in the EMU legal framework and
in the EU Member States’ attitudes towards the international financial institutions, es-
pecially the IMF, and others come from the international financial law and the institu-
tional dynamics of the international financial organisations and fora.
If we look at the EU law, it has also generated some barriers against the develop-
ments of the EMU external relations. The most relevant are: the asymmetrical character
of the EMU, the dichotomy between the EU and the Euro area, and the reluctance of
some EU Member States and their bureaucracies to lose privileged positions at the IMF
and other financial institutions, in particular some Euro area members holding the chair
or the alternate executive director position of their constituencies.10
The EMU has been characterized by a specific combination of monetary transfer of
competences from the Member States to the EU institutions, the ECB, and the weak
economic coordination of national economic policies at the EU level. The asymmetry
between the M of EMU and the E is one of the dominant features of EMU and it deter-
mines much of the EMU’s external relations.11 Taking into account the logic of Arts 3,
para. 2 and 216, para. 1, TFEU and the CJEU case-law on EU external competences,12 I
10 This argument was mentioned by European Commission, EMU@10: The Evolution of Economic Gov-
ernance in EMU, in Economic Papers no. 328, 2008, p. 46. See the strong criticism of the former Executive
Board member of the ECB L. BINI SMAGHI, Powerless Europe: Why is the Euro Area Still a Political Dwarf?, in
International Finance, 2006, p. 16 “The real obstacle to stronger [Euro area] representation does not reside
in the aversion of its citizens but rather in its national institutions and policy makers’ reluctance to leave
their seats at the table. […] Unless national representatives are particularly gifted in understanding the
little power that they have in their current role, they will tend to use all possible arguments to oppose a
single Euro area representation. The ultimate argument is ‘the political conditions are not yet ripe’, which
means in plain words ‘I don’t like it’.”
11 ECB, The External Representation of the EU and EMU, in ECB Monthly Bulletin, May 2011, pp. 96-97; M.
DUTZLER, EMU and the Representation of the Community in International Organizations, in S. GRILLER, M. WEIDEL
(eds), External Economic Relations and Foreign Policy in the European Union, Wien: Beck, 2002, p. 449; M.
HERRMANN, Monetary Sovereignty of the Euro and External Relations of the Euro Area: Competences, Procedures
and Practices, in European Foreign Affairs Review, 2002, p. 1; M. LÓPEZ- ESCUDERO, La politique de taux de
change de l'euro vis-à-vis des monnaies de pays tiers, in Mélanges en hommage à Jean-Victor Louis, Vol II,
Brussels: Bruylant 2003, pp. 282-300; J.V. LOUIS, Les relations extérieures de l'union économique et monétaire,
in E. CANNIZZARO (ed.), The European Union as an Actor in International Relations, The Hague: Kluwer, 2002, p.
77; C. ZILIOLI, M. SELMAYER, The External Relations of the Euro Area: Legal Aspects, in Common Market Law Re-
view, 1996, p. 273.
12 Court of Justice, judgment of 31 March 1971, case 22/70, Commission v. Council (‘ERTA’); opinion
1/76 of 26 April 1977; opinion 1/94 of 15 November 1994: judgment of 14 April 2005, case C-519/03,
Commission v. Luxemburg; judgment of 14 July 2005, case C-433/03, Commission v. Germany; opinion 1/03
of 7 February 2006; judgment of 24 April 2007, case C-523/04, Commission v. Netherlands; opinion 1/13 of
14 October 2014. About this doctrine see among others P. EECKHOUT, EU External Relations Law, Oxford:

474 Manuel Lopez-Escudero
consider an exclusive EU external competence in monetary and exchange rates matters
to be logical. Because the EU has an exclusive internal competence on monetary and
exchange rate policy, the EU alone must be responsible for the external representation
of that competence. In contrast, the EU is not able to exercise an exclusive external
competence on economic matters due to the persistent internal competences of EU
Member States on economic policy. It is an area of coordination or shared competence,
and a mixed representation at the IMF (Member States and EU) and other organisations
and fora would seem to be a consistent way for the EU to proceed.13
The dichotomy between the EU and the Euro area also seems an inconvenience for
the EU relationship with the international financial institutions, especially the IMF. Now-
adays, only 19 EU Member States make up the Euro area and nine Member States have
not yet made the leap to the common currency. The EU cannot expect to substitute the
EU members outside the Euro area in international organizations and forums like the
IMF, because these countries maintain their monetary sovereignty.14
If we turn now to the international financial law, there are two main barriers to the
EU participation in the complex network of international organisations and fora compe-
tent in financial affairs. The first one is the country-based character of these institutions
and the second one is the institutional complexity of some organ of these organisations
such as the IMF Executive Board.
The international financial architecture is built by states and the principle of one
country, one money is at the centre of all the international financial institutions and fo-
rum. The Euro and the Euro area are aliens in this international financial system com-
posed by the G-20, the Financial Stability Board (FSB) and many standard setting bodies,
the Bank of International Settlements (BIS), the Organisation for Economic Cooperation
Oxford University Press, 2011; P. EECKHOUT, Exclusive External Competences: Constructing the EU as an Inter-
national Actor, in European Court of Justice, The Court of Justice and the Construction of Europe: Analyses and
Perspectives on Sixty Years of Case-law, Berlin: Springer Verlag, 2013, pp. 613-626; R. GOSALBO BONO, The Or-
ganization of the External Relations of the European Union in the Treaty of Lisbon, in P. KOUTRAKOS (ed.), The
European Union’s External Relations a Year After Lisbon, CLEER Working Paper 2011/3; C. HILLION, P.
KOUTRAKOS (eds), Mixed Agreements Revisited, Oxford: Hart Publishing, 2011; G. DE BAERE, P. KOUTRAKOS, The
Interactions Between the Legislature and the Judiciary in EU External Relations, in T. SYRPIS (ed.), The Judiciary,
the Legislature and the EU Internal Market, Cambridge: Cambridge University Press, 2012.
13 For a different view, see J.V. LOUIS, L’Union européenne et sa monnaie, in Commentaire J. Mégret,
Brussels: Bruylant, 2009, p. 162; and S. CAFARO, Il governo delle organizzazioni di Bretton Woods. Analisi criti-
ca, processi di revisione in atto e proposte di riforma, Torino: Giapichelli, 2012, p. 162.
14 In that sense, Art. 139 TFEU excludes the application of the following provisions of the Treaties to
the Member States with a derogation: (g) monetary agreements and other measures relating to ex-
change-rate policy (Art. 219); [...] (i) decisions establishing common positions on issues of particular rele-
vance for economic and monetary union within the competent international financial institutions and
conferences (Art. 138, para. 1); (j) measures to ensure unified representation within the international fi-
nancial institutions and conferences (Art. 138, para. 2).

New Perspectives on EU-IMF Relations: A Step to Strengthen the EMU External Governance 475
and Development (OECD), and the IMF. The EU participation in this system needs to
erode its intergovernmental nature.
In addition, some key organs of these international financial institutions has a com-
plex institutional structure, as is the case of the IMF Executive Board that consists of 24
executive directors (EDs)15 but there is no EU, Euro area, or EU Member States constitu-
ency. The EU Member States’ representation is spread among many executive directors.
While Germany, the United Kingdom, and France each appoint one Executive Director
and an alternate, all other EU Member States participate in the election of seven differ-
ent executive directors and form mixed constituencies, together with other non-EU
Member States. The EU countries are overrepresented in the IMF Executive Board with
one-third of EDs and the high voting share (more than 30 per cent), but the influence of
the Europeans on IMF policy is more limited than the US, which has, however, a quota
about half the size of the EU's aggregate quota.16
ii.2. The pragmatic arrangements: The EU in the IMF
Due to these obstacles, the EU has applied a pragmatic approach in order to participate
in the international financial and monetary system17 and, in particular, in the IMF.18 The
most relevant pragmatic arrangements agreed by the EU and the IMF are the following:
15 See IMF Executive Directors and Voting Power, www.imf.org.
16 The clearest way to explain this contradiction is to use power index analysis, which political scien-
tists use to measure the power of an institution’s member by taking into account not only its voting share
but also its real possibilities to influence the final outcome of the voting process. Applying the Banzhaf
Index, the Coleman’s Power Index, and the Shapley and Shubik Index, some economists have analysed
the voting power of the EU and the Eurozone in the IMF. These analyses show that the US has more real
voting power in the current IMF decision-making process than its voting share would suggest. See M.
GIOVANNINI et al., External Representation of the Euro Area, IP/A/ECON/FWC/2010_19, May 2012, p. 45; M.
LEECH, S. LEECH, Power Versus Weight in IMF Governance: the Possible Beneficial Implications of a United Euro-
pean Bloc Vote, in A. BIURA (ed.), Reforming the Governance of the IMF and the World Bank, London: Anthem
Press, 2005; P. BRANDER, H. GRECH, I. PATERSON, Unifying EU Representation at the IMF Executive Board A Voting
and Veto Power Analysis, Vienna: Institute for Advanced Studies, 2009.
17 I focus in the EU-IMF relations, but the EU participation in other international institutions and fora
conforming the international financial and monetary system is also very complex. See L. QUAGLIA, The Eu-
ropean Union and Global Financial Regulation, Oxford: Oxford University Press, 2014; F. AMTENBRINK, N.
BLOKKER, S. VAN DEN BOGAERT, M. CUYVERS, M. HEINE, C. HILLION, M. KANTOROWICZ, A. LENK, L. REPASI, The European
Union's Role in International Economic Fora. Paper 1: The G20, 2015; J. WOUTERS, J. ODERMATT, International
Banking Standards, Private Law and the European Union, in M. CREMONA, H.W. MICHLITZ, The External Dimen-
sion of EU Private Law, Oxford: Hart, 2014, p. 290; C. OHLER, Back in Balance? The EU and the Challenges of
International Financial Regulation, in D. KOCHENOV, F. AMTENBRINK (eds), The European Union’s Shaping of the
International Legal Order, Cambridge: Cambridge University Press, 2014; ECONOPOLIS, The European Union’s
Role in International Economic Fora. Paper 2: The FSB, 2015; M. LOPEZ-ESCUDERO, EU Banking Union and Inter-
national Financial Law, in L. HINOJOSA MARTÍNEZ, J.M. BENEYTO PÉREZ, European Banking Union. The New Regime,
Deventer: Kluwer, 2015, pp. 181-198.

476 Manuel Lopez-Escudero
a) Restricted presence of the EU institutions in the IMF organs.
Even though all the EU countries participate in the IMF, the EU itself is not an IMF
member because it is a strictly intergovernmental organisation only composed by sov-
ereign States. Nevertheless, since 1999 the IMF granted ECB the observer status by a
decision of the Board of Governors.19 The ECB sends a representative to meetings of
the Executive Board which deal with Euro area policies in the context of the Art. IV con-
sultations, Fund surveillance under Art. IV over the policies of individual Euro area
members, the role of the Euro in the international monetary system, the World Eco-
nomic Outlook, global financial stability reports, and world economic and market devel-
opments. The observer status means that the ECB representative at Executive Board
meetings will be able to address the Board with the permission of the Chairman on
matters within the responsibility of the ECB and may circulate written statements in ad-
vance of Board meetings to which the ECB has been invited.
The EU also has observer status in the International Monetary and Financial Com-
mittee (IMFC), a consultative IMF organ created in 1999. The President of the ECB and
the European Commissioner for Economic and Financial Affairs, Taxation and Customs
attend the twice a year meetings as observers in the context of the IMF’s Spring and
Annual Meetings. Both EU representatives are allowed to make statements at these
meetings, commenting on economic developments related to the Euro area. The EU
Council rotating presidency also makes a statement.
Finally, it is interesting to note that, for the IMF’s first multilateral consultation on
the topic of global imbalances in 2006, the Euro area as an entity (rather than individual
Member States) was invited to participate together with China, Japan, Saudi Arabia, and
the United States.20
b) Incorporation of the Euro in the composition of the SDR basket.
The Special Drawing Right (SDR) is the unit of account for the IMF. Before the ap-
pearance of the Euro, the SDR basket was composed of the US dollar, the pound ster-
ling, the Japanese yen, the French franc, and the deutsche mark. The IMF took into ac-
count the Euro and changed the composition of the SDR basket by three Board of Gov-
18 About the origin of this approach, see A. BROOME, The Politics of IMF-EU Cooperation: Institutional
Challenge from the Maastricht Treaty to the Launch of the Euro, in Journal of European Public Policy, 2013, pp.
1-15.
19 IMF Decision 12925-(03/1) of 27 December 2002, as amended by Decision 13414-(05/01) of 23 De-
cember 2004, 13612-(05/108) of 22 December 2005, and 14517-(10/1) of 5 January 2010 on Selected deci-
sions and selected documents of the International Monetary Fund, updated as of 31 December 2013.
20 IMF Staff, The Multilateral Consultation on Global Imbalances, in IMF Issues Brief, July 2003. As a re-
sult, the IMF introduced in 2011 the first consolidated spill-over report, which assesses interconnections in
the global economy and in particular potential spill-overs from the five most “systemic” economies. See
ECB, IMF Surveillance of the Euro Area and its Member Countries, in ECB Economic Bulletin no. 4, 2015, p. 80.

New Perspectives on EU-IMF Relations: A Step to Strengthen the EMU External Governance 477
ernors’ decisions on September 1998.21 Taking effect on January 1, 1999, these deci-
sions replaced references in the SDR basket to the Deutsche mark and the French franc
with references to the Euro as the currency of Germany and France, respectively. In ad-
dition, the currency amounts of the Deutsche mark and the French franc in the SDR val-
uation basket have been automatically replaced by the Euro as the currency of Germa-
ny and France.22
c) IMF surveillance of Euro area policies under Art. IV consultations.
Under Art. IV, Section 3, of the IMF Articles of Agreement the Fund oversees the in-
ternational monetary system in order to ensure its effective operation and oversees the
compliance of each member with its obligations. This is the legal basis for the surveil-
lance activity of the IMF over the national economies of all member countries and over
the world economy.23 To take into account the EMU impact, the Executive Board adopt-
ed decisions in 1998 and 200224 to extend IMF surveillance to the Euro area, maintain-
ing at the same time the individual supervision of the Euro area countries.25
The new Decision on Bilateral and Multilateral Surveillance regulates the application
of surveillance procedure to the currency unions and has thus completed the specific
decisions on the Euro area. Its para. 8 says that members of currency unions remain
subject to all of their obligations under Art. IV, Section 1, and, accordingly, each member
is accountable for those policies that are conducted by union-level institutions on its
behalf. In its surveillance over the policies of members of a currency union, the Fund
will assess whether relevant policies implemented at the level of the currency union (in-
cluding exchange rate and monetary policies) and at the level of members are promot-
ing the balance of payments and domestic stability of the union and will advise on poli-
cy adjustments necessary for this purpose. Because exchange rate policies in a currency
21 IMF Decision 11801-(98/101) G/S, Decision 11802-(98/101) G/S and Decision 11803-(98/101), G/S, of
21 September 1998. See IMF, Selected Decisions and Selected Documents of the International Monetary Fund,
updated as of 31 December 2013.
22 In November 2015, the IMF Executive Board decided that, effective 1 October 2016, the Chinese
renminbi will be included in the SDR basket as a fifth currency, along with the US dollar, euro, Japanese
yen and pound sterling. See IMF, Review of the Special Drawing Right (SDR) Currency Basket, IMF Factsheet, 30
November 2015.
23 IMF, Modernizing the Legal Framework for Surveillance - An Integrated Surveillance Decision, 26 June
2012, www.imf.org.
24 IMF Decision 11846-(98/125) of 9 December 1998 on modalities for conducting surveillance over
the monetary and exchange rate policies of the members of the euro area, as set out in SM/98/257
(11/25/98), effective of 11 December 1998; IMF Decision 12899-(02/119) of 4 December 2002 on modali-
ties for surveillance over Euro area policies in context of Art. IV consultations with member countries, as
amended by Decision 14062-(08/15) of 12 February 2008. See IMF, Selected Decisions and Selected Docu-
ments of the International Monetary Fund, updated as of 31 December 2013, www.imf.org.
25 In 2015, all the documents related to the IV consultation on Euro area are published in the same
document IMF, Euro Area Policies: 2015 Article IV Consultation Press Release; Staff Report; and Statement by
the Executive Director, in IMF Country Report 15/204, 10 July 2015, www.imf.org.

478 Manuel Lopez-Escudero
union are implemented at the level of the union, the principles for the guidance of
members’ exchange rate policies and the associated indicators set out in para. 21 of
this Decision only apply at the level of the currency union. In my opinion, it is another
relevant precedent for an EU membership at the IMF, taking into account the currency
and not the home country of that currency.26
The Euro area was also considered directly by the IMF in the Financial Sector As-
sessment Programme (FSAP). In April 2010 the IMF’s Executive Board agreed to consider
making stability assessments under the FSAP a mandatory part of bilateral surveillance.
In September 2010 this agreement took concrete shape when the IMF made it manda-
tory for 25 jurisdictions with systemically important financial sectors to undergo finan-
cial stability assessments under the FSAP every five years. The Euro area is one of these
jurisdictions with a systemically important financial sector, and the first EU-wide FSAP
was concluded in March 2013.27
d) IMF financial assistance for EU Member States.
The 2008 Great Recession precipitated a European sovereign debt crisis, and some
EU members needed economic assistance from abroad to address their economic
problems. EU Member States outside and inside the Euro area required financial assis-
tance, and in this context the IMF and the EU have cooperated closely to assist those EU
countries with balance of payments problems, the EU today surprisingly being the big-
gest user of IMF resources.
Art. V, Section 3 of the IMF Articles of Agreement allows the IMF to finance Member
States with balance of payments problems. From the IMF law perspective, EU Member
States have access to Fund facilities in the same way that all IMF members do, and being
part of a currency union is irrelevant. The EU primary law does not preclude an EU
Member State from requesting the use of IMF resources, but some requirements must
be fulfilled which differ from those laid down for Euro area members. The EU Member
States outside the Euro area which face difficulties can be helped by the EU using the
medium-term financial assistance facility, for which the legal basis is Art. 143 TFEU de-
veloped by Regulation (EC) 332/2002 of the Council of the 18 February 2002 establishing
a facility providing medium-term financial assistance for Member States' balances of
payments. Art. 143, para. 2, let. a), TFEU enables the EU Member State to request aid
from “any other international organization to which such a member may have recourse.”
26 A deep and critical study of the IMF surveillance practice in the euro area has revealed that the Eu-
rozone surveillance and the surveillance of individual euro countries by the Fund were not integrated.
See J. PISANI-FERRY, A.SAPIR, G. WOLFF, An Evaluation of IMF Surveillance of the Euro Area, Brussels: Bruegel
Blueprint 14, 2011. See also Task Force on IMF Issues of the international relations committee of the Eu-
ropean system of Central banks, IMF Surveillance in Europe, in ECB, Occasional Paper Series no. 158, 30 Jan-
uary 2015, and ECB, IMF Surveillance of the Euro Area and its Member Countries, cit., pp. 78-85.
27 IMF, European Union: Financial System Stability Assessment, in IMF Country Report no. 13/75, March
2013.

New Perspectives on EU-IMF Relations: A Step to Strengthen the EMU External Governance 479
The use of the EU’s medium-term financial assistance facility was combined with IMF
loans to help Hungary and Latvia in 2008 and Romania in 2009, 2011 and 2013.28
The legal framework for Euro area countries under EU laws was different, and the
assistance of the IMF to these states was more complicated. In spite of Art. 125 TFEU,
which prohibits EU Member States from assuming the commitments of other EU Mem-
ber States (the no bail-out clause), the EU Council in May 2010 used Art. 122, para. 2, as
the legal basis for establishing an assistance mechanism for Euro area states in crisis and
built the European Stabilization Mechanism with two legs. The EU leg was the European
Financial Stabilization Mechanism (EFSM), established by Regulation (EU) 407/2010 of the
Council of the 11 May 2010 on establishing a European financial stabilization mecha-
nism, and reproducing for the Euro area countries the medium-term financial assistance
facility for countries outside the Euro. The intergovernmental leg was the European Fi-
nancial Stability Facility (EFSF), created outside EU law by Euro area Member States on a
temporary basis until June 2013. In December 2010, the European Council decided to
enact a permanent crisis resolution mechanism, and it was adopted as a simplified re-
form of the TFEU by the Decision 2011/199/EU of the European Council of the 25 March
2011.29 The Treaty Establishing the European Stability Mechanism (ESM) was signed in
Brussels on February 2, 2012. The ESM was inaugurated on October 8, 2012 and is oper-
ational, using the staff and building of the EFSF, which has substituted for the ESM. The
ESM is an intergovernmental organization under public international law and a perma-
nent crisis resolution mechanism for the countries of the Euro area.
These Euro area resolution mechanisms have been activated in the context of the
EU sovereign debt crisis, and in many cases, the IMF has supported the Euro area coun-
tries: Greece in 2010 and 2012, Ireland in 2010, Portugal in 2011 and, Cyprus in 2013.30
On December 3, 2012 the Spanish government formally requested the disbursement of
close to 39.5 billion euros funds. The IMF did not agree to provide any loan to Spain, but
it did agree to monitor European financial assistance for Spain’s bank recapitalization
program under technical assistance, which ended in January 2014. Irelands and Portu-
gal concluded their programmes in December 2013 and June 2014, respectively, and
they then entered into Post-Programme Monitoring. On August 2015, the European
Commission signed a Memorandum of Understanding (MoU) with Greece following ap-
proval by the European Stability Mechanism Board of Governors for further stability
support accompanied by a third economic adjustment programme. This paves the way
for mobilising up to 86 billion euros in financial assistance to Greece over three years
28 All the information is on the EU website at ec.europa.eu.
29 European Council Decision 2011/199/EU of 25 March 2011 amending Art. 136 of the Treaty on the
Functioning of the European Union with regard to a stability mechanism for Member States whose cur-
rency is the euro. The validity of this decision and the ESM Treaty was confirmed by the CJEU in the fa-
mous full Court judgment of 27 November 2012, case C-370/12, Pringle.
30 All the information is on the EU website at ec.europa.eu.

480 Manuel Lopez-Escudero
(2015-2018).31 The IMF did not agree at the moment to lend more money to Greece but
the IMF has confirmed that it has assisted in preparing the programme and it continues
to support the process.
From an economic and political perspective, the IMF’s involvement in the assistance
to EU countries during the sovereign debt crisis was colossal.32 Even though the EU is not
member of the IMF, the EU countries have been assisted by the Fund, which has collabo-
rated extensively with the European Commission and ECB in the application of the Euro
area programme countries.33 The EU institutions had little experience in the surveillance
of economic programmes, and they needed the IMF’s expertise, which has more than 60
years of experience lending money and encouraging reforms to help countries with bal-
ance-of-payments problems or in financial crisis. This enhanced collaboration has be-
come known as the Troika and its roles and activities generate some critics.34
e) Coordination of the EU Member States at the IMF: the SCIMF and the EURIMF.
EU leaders have called for enhanced cooperation on economic and financial mat-
ters related to the IMF since the Vienna Council in 1998. Following this, EU Member
States set up a multi-layered structure of coordination, composed of two bodies that
allow for a certain level of coordination among EU Member States at the IMF: the
EURIMF and the SCIMF.35
The SCIMF is a sub-committee on IMF matters and related issues, linked to the Eco-
nomic and Financial Committee (EFC).36 The SCIMF comprises one representative of
each Country’s finance ministry and central bank plus two from the DG Ecfin of the Eu-
ropean Commission and two from the ECB. The SCIMF meets eight to ten times a year
31 See the information on the EU web site at ec.europa.eu.
32 IMF, The IMF and Europe, in Factsheet, 10 April 2015. See, M. KOOPS, T. TOLKSDORF, The European Un-
ion’s Role in International Economic Fora. Paper 4: The IMF, 2015, pp. 52-58.
33 See W. BERGTHALER, The Relationship between International Monetary Fund Law and European Union
Law: Influence, Impact, Effect, and Interaction, in R.A. WESSEL, S. BLOCKMANS (eds), Between Autonomy and De-
pendence, Berlin: Springer Verlag, 2012, pp. 183-186; and for a deep analysis of the IMF assistance to the
EU countries, see J. PISANI-FERRY, A. SAPIR, G. WOLFF, EU-IMF Assistance to Euro-area Countries: an Early As-
sessment, Brussels: Bruegel Blueprint, 2013.
34 See the European Parliament Resolution 2013/2277(INI) of 13 March 2014 on the enquiry on the
role and operations of the Troika (ECB, Commission and IMF) with regard to the euro area programme
countries, europarl.europa.eu.
35 J. AUBRECHTOVÁ, W. COUSSENS, G. PINEAU, How to Reconcile EU Integration with the Governance of the In-
ternational Monetary Fund, in Banking Journal no. 18, 2010, pp. 7-8; J. KOOPS, D. TOLKSDOFR, The European Un-
ion’s Role in International Economic Fora, cit., pp. 46-48.
36 The EFC also meets in a Euro area configuration, the so called Eurogroup Working Group (EWG), in
which only the Euro area Member States, the Commission and the ECB are represented. In this configura-
tion, the Committee prepares the work of the Eurogroup and usually meets once a month ahead of Eu-
rogroup meetings. The Eurogroup Working Group members elect a President for a period of four years,
which may be extended by a further two years. It is full-time role, in line with the agreement by the heads
of state or government of the Euro area of 26 October 2011, and is based in Brussels in the General Sec-
retariat of the Council of the EU. See, Eurozone Portal, eurozone.europa.eu.

New Perspectives on EU-IMF Relations: A Step to Strengthen the EMU External Governance 481
in Brussels, depending on its chairman, and is a consensus-based body (although sim-
ple majority voting is the legal rule). Due to its intergovernmental nature, SCIMF is dom-
inated by a culture of diplomacy and compromise building.37 The President of SCIMF is
chosen by consensus from amongst high-ranking officials belonging to the EFC.
The SCIMF drafts the text of the EU Council President's speech at the spring and au-
tumn meetings of the IMFC, which is usually broad enough to be consensual. Another
task of the SCIMF is to prepare the Art. IV review of the Eurozone, and, on an ad-hoc ba-
sis, the SCIMF may draft common policy papers known as “common understandings”
about key subjects of IMF activity.
The second body, the EURIMF, is an informal body based in Washington, D.C., com-
posed of representatives of EU Member States at the IMF and a representative from
both the EU Delegation in Washington, D.C., and from the ECB representatives of the EU
Member States in the IMF. Interestingly, the presidency of this group is chosen for two
years, and therefore does not always reflect the EU presidency, which rotates more fre-
quently. The EURIMF so-called permanent President is in charge of presenting the views
of the EU and the Euro area to the IMF Executive Board in the form of written state-
ments.38
The EURIMF meets once to three times a week in Washington, and its activities con-
sist primarily of day-to-day coordination and informal exchange of views and infor-
mation on Member States’ positions, especially on IMF economic surveillance activities.
For the Euro area Art. IV discussions in the IMF Executive Board, the Euro area speaks
with one voice and issues a written statement, which includes a distinct section on
monetary policy prepared by the ECB. Apart from these Art. IV review exercises, EURIMF
discusses almost all important political or economic topics that are on the agenda of
the IMF Executive Board.39
The EU Member States’ coordination has evolved in recent years through EURIMF
and SCIMF activities. However, there are limits to the ability of the EU members to forge
common positions.
37 EURODAD, European Coordination at the World Bank and International Monetary Fund: A Question of
Harmony?, January 2006, www.eurodad.org, p. 11
38 D. HODSON, The Paradox of EMU’s External Representation: The Case of the G20 and the IMF, in EUSA
Twelfth Biennial International Conference, Massachusetts-Boston, 2011, p. 13.
39 The most common and formalized coordination method is the EU Presidency grey mechanism.
The EU presidency prepares a European grey to be discussed at EURIMF before the Board meeting. The
strongest form of coordination is the so-called common written statement (also known as grey), which
precludes other EU chairs from issuing separate written statements. The EURIMF is a deliberative body
dedicated simply to exchanging views and opinions with a high degree of frankness and openness with-
out taking binding decisions. The European executive directors are linked to their capitals. See ECB, The
External Representation of the EU and EMU, in ECB Monthly Bulletin no. 5, 2015, p. 92.

482 Manuel Lopez-Escudero
III. The Impact of the 2010 IMF Reform Implementation on the EU
After a limited IMF reform in 2008, which became effective on 3 March 2011, a more
ambitious IMF reform package was agreed to by the G-20 leaders in Seoul in November
2010. It was implemented by the Board of Governors of the IMF, which approved a
package of relevant reforms of the Fund’s quotas and governance on 15 December
2010, completing the 14th General Review of Quotas.40
The package of IMF governance reforms should have been put in place by Novem-
ber 2012, in time for the biennial election of executive directors at that time. This dead-
line was not met, because the United States had not given its approval due to the Re-
publican reluctance in the Congress. This country with 16.75 per cent of the vote in the
IMF has a veto power because the entry into force of the 2010 reform requires 85 per
cent of member countries’ votes of the IMF, according to the IMF Articles of Agree-
ments. Because of other countries’ pressures, as well as US academics and officials41
and the IMF staff, the Obama administration has obtained Congress approval to ratify
the reform on 18 December 2015.42
The 2010 reform fixed an unprecedented 100 per cent increase in total quotas and
a reallocation of quota and voting shares in the IMF to better reflect the changing rela-
tive weights of the IMF’s member countries in the global economy. The reform also re-
structures the composition of the IMF’s Executive Board, paving the way for an increase
in the representation of emerging markets and developing economies (EMDCs) in the
40 IMF Resolution 66-2 of 15 December 2010 on Fourteenth General Review of Quotas and Reform of
the Executive Board, in IMF, Selected Decisions and Selected Documents of the IMF, Thirty-Sixth Issue, updated
as of 31 December 2011, p. 9. The content of the 2010 reform is well explained in IMF, IMF Quota and Gov-
ernance Reform: Elements of an Agreement, 2010. For a general overview, See S. HAGAN, Reforming the IMF, in
M. GIOVANOLI, D. DEVOS (eds), International Monetary and Financial Law. The Global Crisis, Oxford: Oxford
University Press, 2010, pp. 40–68; W. BERGTHALER, G. BOSSU, Recent Legal Developments in the International
Monetary Fund, in European Yearbook of International Economic Law, 2010, p. 391.
41 T. TRUMAN, IMF Governance Reform, Better Late than Never, in Real Time Economic Issues Watch, Wash-
ington, DC.: Peterson Institute for International Economics, 16 December 2015; R. M. NELSON, M. A. WEISS,
IMF Reforms: Issues for Congress, Congressional Research Service, 9 April 2015; R. HENNING, U.S. Interests
and the International Monetary Fund, in Policy Brief no. 9-12, Washington, DC.: Peterson Institute for Inter-
national Economics; G. LAVELLE, Legislating International Organization: the US Congress, the IMF and the World
Bank, Oxford: Oxford University Press, 2011.
42 In order for the proposed amendment on reform of the Executive Board to enter into force, ac-
ceptance by three-fifths of the Fund's 188 members (or 113 members) being 85 percent of the Fund's
total voting power is required. As of 21 January 2016, 149 members having 94.04 per cent of total voting
power had accepted the amendment. For the quota increases under the 14th General Review of Quotas
to become effective, the entry into force of the proposed amendment to reform the Executive Board is
required, as well as the consent to the quota increase by members having not less than 70 per cent of
total quotas. As of 21 January 2016, 170 members having 97.667 percent of total quota had consented.
See IMF, Acceptances of the Proposed Amendment of the Articles of Agreement on Reform of the Executive
Board and Consents to 2010 Quota Increase, 22 January 2016, www.imf.org.

New Perspectives on EU-IMF Relations: A Step to Strengthen the EMU External Governance 483
day-to-day decision-making at the IMF. There will be two fewer Board members from
advanced European countries, and all Executive Directors will be elected rather than
appointed, as some are now.
This reform is relevant for the EU position in the IMF in two ways. First, it introduces
some legal changes in the composition and functioning of the Executive Board that
would facilitate the joint EU/Euro area representation. The subsequent modifications in
IMF quotas will erode the EU’s relative position. Second, it marks a clear tendency to re-
duce the EU Member States’ quotas in the IMF and the rise of the EMDCs linked to the
increase in the influence of the emerging countries in the global economy.
iii.1. The EU representation in a renovated IMF Executive Board
Some legal conditions of the current legal framework constrain joint EU representation
at the IMF Executive Board. First, members having the five largest quotas (currently the
US, Japan, Germany, the United Kingdom, and France) have the right but also the obliga-
tion to appoint an executive director to the Executive Board.43 Accordingly, Germany,
the UK, and France do not participate in the biannual regular elections of executive di-
rectors and thus no other EU member could join a German, British, or French chair. It
would thus be impossible for all of the EU or Euro area members to form a single con-
stituency and elect a single executive director. Second, the rules under which executive
directors are elected biannually prescribe that, in order to achieve an equitable distribu-
tion of voting power among executive directors, there is an upper limit of nine per cent
of voting power imposed on the constitution of any constituency. Consequently, EU
Member States (currently representing together about 30.8 per cent of the IMF’s total
voting power), minus the UK, Germany, and France, who together represent about 14.4
per cent of the IMF’s total voting power, represent about 16.4 per cent of the total vot-
ing power of which the Euro area accounts for 12.2 per cent and thus both groups
would exceed the current upper limit of nine per cent. Finally, the formation of constit-
uencies is voluntary, and no IMF member can be compelled to be part of a constituency.
The 2010 IMF reform introduces relevant changes in these legal conditions to im-
prove the governance of the IMF,44 and some of them would facilitate the consolidation
of the European representation on the Executive Board. In particular, four aspects must
be emphasized: (i) the elimination of the category of appointed directors at the IMF Ex-
ecutive Board thereby enabling European consolidation on the Board (i.e., members
with the five largest voting powers would no longer appoint one executive director
each) which would mean that all of the Executive Board will be elected; (ii) the election
rules contained in Schedule E of the Articles of Agreements will be deleted, and, going
43 Art. XII, Section 3 of the IMF’s Articles.
44 W. BERGTHALER, The Relationship between International Monetary Fund Law and European Union Law:
Influence, cit., p. 179.

484 Manuel Lopez-Escudero
forward, the IMF Board of Governors will set the upper and lower limits for the regular
election of executive directors for each biannual election (i.e., making a Euro area chair
pooling more than 9 per cent of the votes possible); (iii) under Art. XII, Section 3, let. e),
of the IMF’s Articles together with Board of Governors Resolution 66-2, executive direc-
tors representing seven or more members in a constituency may appoint a second Al-
ternate following the 2012 regular elections of executive directors (i.e., a Euro area chair
would be an executive director as well as two Euro area alternate executive directors,
which would be an interesting way to distribute the responsibilities between Euro area
countries); (iv) the commitment to 24 executive directors at the IMF Executive Board
would remain in place for the time being;45 and (iv) the IMF Board of Governors noted
the commitment to reduce ‘‘advanced European country representation’’ at the IMF Ex-
ecutive Board by two executive directors leading to a greater integration and consolida-
tion of European representation.46
The first step towards Board realignment was taken in November 2012 by the
Benelux countries. The Netherlands and its constituency partners, Belgium and Luxem-
bourg, decided to create a new constituency as of first November 2012.47 The constitu-
ency comprises48 seven states, or a full quarter of all EU members (three Euro area
countries), alongside a number of (potential) EU candidate countries and close Europe-
an neighbours (15 members). This new constituency is represented by the fifth largest
chair, and it is the largest multi-country constituency on the Executive Board in terms of
quota (6.57 per cent of votes). Belgium and the Netherlands designate the Executive Di-
rector for this group on a rotating basis. Currently, the Executive Director is Dutch; the
Alternate Executive Director is Belgian. Except for Luxembourg and Montenegro, most
of the countries in the new constituency will be adversely affected by the 2010 IMF re-
45 Art. XII, Section 3, let. b) of the IMF’s Articles (currently, and as proposed to be amended by Board
of Governors Resolution 66-2) sets the number of Executive Directors at 20, which may be increased or
decreased by the Board of Governors with a majority of 85 per cent of the total voting power, for the
purposes of each regular election of Executive Directors.
46 This political agreement was adopted at the G-20 Ministerial Meeting in Gyeongju, Korea in 2010.
See IMF, G-20 Ministers Agree “Historic” Reforms in IMF Governance, in News Release, 23 October 2010,
www.imf.org. It was argued that the overrepresentation of the EU on the Executive Board was denying
emerging countries the opportunity to play a bigger role in the IMF, which was seen as vital for the Fund’s
effectiveness and legitimacy (see, K. GNATH, The Reform of the IMF: Europe’s Short-Term Arithmetic and Long-
Term Choices, in AICGS Transatlantic Perspectives, 2010, p. 4; T. TRUMAN, The Congress Should Support IMF
Governance Reform to Help Stabilize the World Economy, in Peterson Institute for International Economics Poli-
cy Brief PB, July 2013, p. 4).
47 Netherlands Central Bank, IMF Governance Reform: Open Economies Have a Place at the Table, in DN
BULLETIN, October 2012.
48 The chair is composed by Belgium, Armenia, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus,
Georgia, Israel, Luxembourg, former Yugoslav Republic of Macedonia, Moldova, Montenegro, The Nether-
lands, Romania, and Ukraine.

New Perspectives on EU-IMF Relations: A Step to Strengthen the EMU External Governance 485
form and will lose quota and voting shares (almost 22 per cent). Therefore, this rea-
lignment is particularly advantageous for these medium and small European countries.
The eight countries left-over from the old Belgian chair have constituted a new Cen-
tral and Eastern European IMF Constituency.49 The Constituency Agreement was signed
in Vienna on July 11, 2012,50 and includes five EU Member States and three Euro area
countries. As a result of the Constituency Agreement, the current executive director is
from Austria and the alternate executive directors rotate between Turkey, the Czech
Republic, and Hungary. The first alternate executive director will be from Austria in
2014-2022 and the second Alternate Director will rotate between Turkey, Czech Repub-
lic, and Hungary. Through this complex rotation scheme, one seat on the IMF’s Execu-
tive Board will be redistributed from the advanced European countries to the emerging
market countries.
This first realignment is a step towards the consolidation of EU representation on
the IMF, but it could also be understood as a movement against the more crucial rea-
lignments instigated by bigger European countries to implement the Gyeongyu com-
promise.51 I am not sure that this first realignment follows the Art. 138 TFUE mandate.
iii.2. New quotas assignments and the EU
Each member Country of the IMF is assigned a quota, based broadly on its relative posi-
tion in the world economy, and this quota determines a member’s maximum financial
commitment to the IMF and its voting power. The distribution of IMF quotas is the key to
explaining the balance of power in the IMF, and the formula to calculate quotas has al-
ways been a highly controversial matter. The current quotas and voting shares of the EU
Member States are based on the application of the 2008 quota formula that is a
weighted average of GDP (weight of 50 per cent), openness (30 per cent), economic vari-
ability (15 per cent), and international reserves (five per cent). For this purpose, GDP is
measured through a blend of GDP, based on market exchange rates (weight of 60 per
cent), and on purchasing power parity (PPP) (40 per cent). The formula also includes a
compression factor that reduces the dispersion in calculated quota shares across mem-
bers.52 The EU Member States together have approximately 31.9 per cent of the quota
shares and 30.9 per cent of the voting shares, which is more than the US (17.7 per cent
and 16.7 per cent respectively), which is the single biggest shareholder in the IMF.
49 The members of this chair are Austria, Belarus, Czech Republic, Hungary, Kosovo, Slovak Republic,
Slovenia and Turkey.
50 See www.friedlnews.com.
51 See the critics by J.V. LOUIS, Monetary Union and the Law: Some Comments, in T. COTTIER, R. LASTRA, C.
TIETJE, S. SATRANGO (eds), The Rule of Law in Monetary Affairs, Cambridge: Cambridge University Press, 2015,
p. 120.
52 The documentation about the IMF studies on quota formula can be found in IMF, IMF Quota and
Governance Publications, 9 October 2012.

486 Manuel Lopez-Escudero
The Executive Board uses the 2008 quota formula as a base for calculating the new
quotas, but using many highly technical and complex corrections to attain the agreed-
upon results. The 2010 package of reforms doubled the overall IMF quotas to about 755
billion dollars and shifted voting power to dynamic emerging market economies. In fact,
the 14th General Review of Quotas will: (i) double quotas from approximately SDR 238.5
billion to approximately SDR 477 billion, (about 715 billion dollars at current exchange
rates); (ii) shift more than six per cent of quota shares from over-represented to under-
represented member countries, a quota shift made possible mainly by reducing the
shares of a number of advanced economies and oil-producing countries; (iii) shift more
than six per cent of quota shares to dynamic EMDCs; (iv) preserve the quota and voting
share of the poorest member countries, and (v) significantly realign quota shares. As a
result of these modifications, the 10 Fund members with the largest voting shares will
consist of the United States, Japan, the so-called BRICs (Brazil, China, India, the Russian
Federation), and the four largest European countries (France, Germany, Italy, the United
Kingdom).53
The 2010 quota reform will only reduce the EU quotas by 1.616 per cent. There will be
some EU Member States that will sacrifice a significant voting share (Belgium, 43 per cent;
Netherlands, 18 per cent; and Bulgaria 37 per cent); the biggest states (Germany, France,
United Kingdom, and Italy) lose between five per cent and seven per cent. Most of the
Central and Eastern states will increase their voting shares by five per cent to 17 per cent),
and Spain, Ireland, and Luxembourg will capture significant additional voting shares.
Clearly, the 2008 quota formula was fruitful for the EU States, and the adjustments ap-
plied in 2010 do not modify those results. The EU decline in the world economy in favour
of emerging economies is insufficiently reflected in the IMF quota and voting shares.
Although the 2010 quota reform was pending and it will be implemented after the US
ratification, it is a transitory modification, because the Resolution 66-2 required the Execu-
tive Board to complete a comprehensive review of the formula. It has discussed the new
formula without success and has decided that consensus on a new quota formula will
best be done in the context of the 15th Review rather than on a stand-alone basis.54
In any case, the negotiation of a new quota formula will be a challenge for the EU
Member States, and their quotas and voting shares in the IMF will be reduced in line
53 All the calculations by IMF Staff are available in IMF, Quota and Governance Reform Elements of an
Agreement, 2010. See also M. MORENO, Metamorfosis del FMI, Madrid: Tecnos, 2011, pp. 174-196; New Rules
For Global Governments, Impact of 2010 IMF Quota Reform: Winners, Losers and Realignments, 24 July 2012,
www.new-rules.org.
54 See IMF, Executive Board Reports on the Quota Formula Review, in Press Release no. 13/30, 30 January
2013; IMF, IMF Executive Board Discusses Quota Formula Review—October 2012, 9 October 2012; IMF, Quota
Formula—Data Update and Further Considerations, in IMF Policy Paper, July 2014.

New Perspectives on EU-IMF Relations: A Step to Strengthen the EMU External Governance 487
with the decrease in their relative weights in the world economy.55 This is a good argu-
ment for going to a single EU or Euro area chair at the IMF and thus compensating for
the loss of individual quotas by unifying the national quotas.
IV. A SINGLE EURO AREA CHAIR IN THE IMF FOR 2025? THE 2015
COMMISSION PROPOSAL AND THE WAY FORWARD
The strengthening of the internal economic governance during the Great Recession, the
impact of the 2010 IMF reform and the decreasing EU weight in the world economy
have influenced the opinion and positions of the EU institutions related to the EU-IMF
relations. In spite of the academic literature,56 what voiced the inadequacy of the EU
position in the IMF and proposed several approaches to a more unified EU representa-
tion or even a single chair for the EU at the IMF, the EU institutions have remained silent
since 1998, apparently comfortable with the pragmatic approach that was chosen for
EU-IMF relations.
The Great Recession contributed to a louder call from the European authorities for
a unified external representation of the Euro area. The Eurogroup President, Jean-
Claude Juncker,57 was quite clear, as was the Commissioner Almunia.58 The European
Parliament also pressed for such action, the Feio Report re-launched the debate and
more recently, on October 25, 2011 a non-legislative resolution on Global Economic
Governance was adopted by the European Parliament, the Hökmark Report, recalling
“that, under Art. 138 of the Lisbon Treaty, the Euro area is supposed to introduce uni-
fied external representation; [the Parliament] urges the Commission to put forward a
legislative proposal to that effect”.59
55 Un update analysis is available in R. MOHAN, M. KAPUR, Emerging Powers and Global Governance:
Whither the IMF?, in IMF Working Paper 15/219, 2015.
56 A. AHEARNE, B. EICHENGREEN, External Monetary and Financial Policy: a Review and a Proposal, in A. SAPIR
(ed.), Fragmented Power: Europe and the Global Economy, Brussels: Bruegel, 2007, p. 142; S. CAFARO, Il gov-
erno delle organizzazioni di Bretton Woods. Analisi critica, processi di revisione in atto e proposte di riforma,
cit., pp. 141-177; J.V. LOUIS, L’Union Européenne et sa monnaie, cit., paras 418-424; L. BINI SMAGHI, A Single EU
Seat in the IMF?, in Journal of Common Market Studies, 2004, p. 229; M. LÓPEZ-ESCUDERO, Crisis y reforma del
Fondo Monetario Internacional, in Revista Española de Derecho Internacional, 2007, p. 435; DE LAROSIÈRE et al.,
Report of the High-Level Group on Financial Supervisions in the EU, 2009, para. 256.
57 Mr. Juncker said "It is absurd for those 15 countries not to agree to have a single representation at
the IMF. It makes us look absolutely ridiculous. We are regarded as buffoons on the international scene",
declaration of the Eurogroup President Mr. Junckers in April 2008, euobserver.com.
58 Speech by J. ALMUNIA, Laying the Foundations of a European Foreign Economic Policy, 6 April 2009, eu-
ropa.eu. He clearly stated that “The Commission has long called for a consolidation of European repre-
sentation on the boards of the IFIs. In the case of the IMF, the argument for a single consolidated Euro-
area chair is quite obvious”.
59 European Parliament, Committee on Economic and Monetary Affairs, Rapporteur: Diogo Feio, Re-
port A7-0282/2010 of 11 October 2010 with recommendations to the Commission on improving the eco-
nomic governance and stability framework of the Union, in particular in the euro area; European Parlia-

488 Manuel Lopez-Escudero
New expectations have been opened by the European Commission with the 2012
Communication about the development of the EMU,60 which included a serious com-
mitment to activate Art. 138 TFEU. The European Commission wanted to take into ac-
count the progress achieved in the internal economic governance in response to the
crisis to strengthen and consolidate its external representation based on the current
Treaties (Art. 17 TEU and Art. 138 TFEU). The focus was on EU representation in the IMF,
and no reference was made to the EU’s participation in other international economic
organizations and fora. The pragmatic approach was deemed unsatisfactory, and the
Commission will propose a two-stage process to enhance the Euro area representation
in the IMF. In a first stage, the Commission will design a rearrangement of the country
constituencies in the IMF so as to re-group countries into Eurozone constituencies
which could also include future Euro area Member States. In parallel, observer status at
the IMF Executive Board should be sought for the Euro area. At a second stage, a single
seat in the IMF bodies is planned with a few specifications. Finally, the Barroso Commis-
sion did not make any proposition to activate this compromise.
The Juncker Commission announced in its 2015 work programme that it intended
to address the external representation of the Euro area in the framework of deepening
the EMU. The Five Presidents’ Report of June 2015 on completing EMU indicates “as
EMU evolves towards Economic, Financial and Fiscal Union, its external representation
should be increasingly unified”.61 This Report criticizes that EU and the Euro area are
still not represented as one in the international financial institutions and this fragment-
ed voice means the EU is punching below its political and economic weight as each Euro
area Member State speaks individually, in particular in the case of the IMF. Consequent-
ly, the Five Presidents’ Report proposes in the first stage of the completion on EMU to
“take steps towards a consolidated external representation of the euro area”.
Taking into account Art. 138 TFEU and the Five Presidents’ Report mandates, the
European Commission published in October 2015 a Communication62 and a Proposal
for a Council Decision in order to unify progressively the Euro area representation in
the IMF.63 According to Art. 138, para. 3, TFUE, it is the Council which, acting on a pro-
posal of the Commission and after consulting the ECB, will decide on the Euro area’s
ment, Committee on Economic and Monetary Affairs, Rapporteur: Gunnar Hökmark, Report A7-
0323/2011 of 25 October 2011 on Global Economic Governance, European Parliament.
60 Communication COM(2012) 777 final/2 of 28 November 2012 from the Commission on blueprint
for a deep and genuine economic and monetary union. Launching a European debate.
61 Five Presidents’ Report of 22 June 2015, Completing Europe's Economic and Monetary Union, p. 17,
ec.europa.eu.
62 Communication COM/2015/0602.
63 Proposal for a Council Decision, COM(2015) 603 final.

New Perspectives on EU-IMF Relations: A Step to Strengthen the EMU External Governance 489
participation and representation in international financial institutions and conferences
based on a qualified majority of the Member States which have adopted the Euro.64
The Commission Proposal is spineless and unambitious in the sense that it does
not encourage EU membership in the IMF. However, it suggests moving to a unified
representation for the Euro area in the IMF since 2025 with the President of the Eu-
rogroup as the representative, applying a gradual approach involving intermediate
transitional steps for representation in the IMFC and the IMF Executive Board. Such
transitional steps would involve granting observer rights to the Euro area represented
by a representative of a Euro area Member State already a member of the Board, in as-
sociation with the Commission and the ECB. Furthermore, the coordination process for
establishing common positions should be strengthened in order to have systematic
common statements on all IMF policy, country and surveillance issues that are of rele-
vance to the Euro area. I consider that the content and strategy established by this Pro-
posal could be understood by analysing the following issues: the EU membership pos-
sibilities at the IMF, the improvement of the coordination of the EU Member States on
IMF issues and the Euro area single chair options.
iv.1. The EU membership possibilities at the IMF
Art. 2 clearly says that the 2015 Commission Proposal lays down provisions for the pro-
gressive establishment of a unified representation as well as common positions of the
Euro area within IMF until the Euro area will have obtained full membership of the IMF.
Consequently, the Proposal takes into account the current IMF membership without
prejudice to the possibility of full membership of the Euro area at a later stage. The ob-
jective pursued by this Proposal is a unified representation with a single seat for the Eu-
ro area within all organs of the IMF, while allowing Euro area Member States to main-
tain their current shareholder status in the Fund. The Commission should undertake
work to achieve this objective but not to obtain full membership in the IMF.
In my opinion, it is not an ambitious approach; the Proposal accepts that the exter-
nal representation of the Euro area will depend on the future status of the Euro area in
the IMF that member countries of the IMF would be willing to grant. In spite of this cer-
tainty, I consider that the EU could apply a more proactive approach and try to elimi-
nate the obstacles to become a full IMF member, which is the best way to be represent-
ed in this international organisation.
As now constituted, the IMF is strictly a country-based organization due to the for-
malistic interpretation of the word countries included in Art. II, Section 2, of the IMF’s Ar-
ticles of Agreement. Nevertheless, some scholars have proposed a more open and up-
64 The 2015 Commission Proposal withdraws the 1998 Proposal for a Council decision on the repre-
sentation of the Community at international level in the context of EMU, which was not adopted and be-
came obsolete since the launch of the euro and the entry into force of the Lisbon Treaty.

490 Manuel Lopez-Escudero
dated interpretation of this word that would allow the inclusion of states and interna-
tional organizations that benefit from an attribution of states’ powers in the monetary
and exchange rate fields. In the case of the EU/Euro area, the responsibility for mone-
tary and exchange rate matters, an essential characteristic of statehood and a condition
for compliance with the obligations resulting from membership of the IMF, no longer
lies with the Member States; it is in the hands of the EU institutions. In addition, the
EU/Euro area has increasing powers on banking supervision and resolution in the
framework of the EU banking union and the strengthening of the EU economic govern-
ance during the crisis has increased the EU competences in this area. Under these cir-
cumstances, the EU has arguably already assumed the characteristics of a country for
the purposes of the Articles of Agreement.65
The modification of the BIS statute to open up membership in the BIS to the ECB66
is a relevant precedent to support this broad interpretation of the word country in Art.
II, Section 2 of the IMF’s Articles of Agreement. However, a less controversial way to
open IMF membership to international organizations with competence in monetary
matters is to introduce a specific clause in Art. II to open the IMF to monetary unions
with specific conditions.67 Arts XI and XII of the Agreement Establishing the World Trade
Organization could be a model, and I think that the new Section 3 in Art. II of the IMF’s
Articles of Agreement could be “Membership shall be open to international organiza-
tions with full competences in monetary matters at such times and in accordance with
such terms as may be prescribed by the Board of Governors”.68 The membership of the
65 E. DENTERS, Representation of the EEC in the IMF, in M. GIOVANOLI (ed.), International Monetary Law. Is-
sues for the New Millenium, Oxford: Oxford University Press, 2000, pp. 221-224; E. DENTERS, The IMF, in J.
WOUTERS (ed.), International Encyclopaedia of Laws: Intergovernmental Organizations, Deventer: Kluwer,
2010, para. 23; R. SMITS, The European Central Bank: Institutional Aspects, The Hague: Kluwer Law, 1997, p.
443; J. WOUTERS, S. VAN KERCHOVEN, T. RAMOPOULOS, The EU and the Euro Area in International Economic Gov-
ernance: the Case of the IMF, in D. KOCHENOV, F. AMTENBRINK (eds), The European’s Union Shaping of the Inter-
national Legal Order, Cambridge: Cambridge University Press, 2013, pp. 321-326.
66 Art. 56 of the Statutes of the Bank for International Settlements of 20 January 1930, text as
amended on 27 June 2005, www.bis.org.
67 In fact, it is an inclusion of a Regional Economic Integration Organization (REIO) clause in the Arti-
cles of Agreements. AREIO clause is commonly defined in UN protocols and conventions as “an organiza-
tion constituted by sovereign states of a given region to which its Member States have transferred com-
petence in respect of matters governed by […] convention or its protocols and [which] has been duly au-
thorised, in accordance with its internal procedures, to sign, ratify, accept, approve or accede to it [the
instruments concerned]”. See for instance Arts 4.1, 4.2, 4.3 and 4.5, 21 and 22 of the Kyoto Protocol. Art. II
of the FAO Constitution was specifically modified to allow for the accession of “regional economic organi-
zations”. On the qualification of the EU as an international (integration) organization also C. ECKES, R.
WESSEL, The European Union: An International Perspective, in T. TRIDIMAS, R. SCHÜTZE (eds), The Oxford Princi-
ples of European Union Law − Volume 1: The European Union Legal Order, Oxford: Oxford University Press,
2014.
68 In that sense, see R. HENNING, Regional Arrangements and the IMF, Seminar of the Institute for Inter-
national Economics on IMF Reform, Washington, 2005.

New Perspectives on EU-IMF Relations: A Step to Strengthen the EMU External Governance 491
EU in the IMF raises the question of whether there should be a new quota to the EU
that simply amasses the current EU member quotas or whether a new quota excluding
the intercommunity trade and subsequently its effect on a member’s role in the IMF’s
governance.
The modification of the IMF Articles of Agreement is conditio sine qua non to open
the IMF to the EU membership and it requires an 85 per cent majority of the votes of
the IMF members. The interest of the emergent countries in EU unification in the IMF,
supported by the US opens up possibilities for this step. However, a strong political will
in the EU countries is required to encourage this relevant IMF reform, and nowadays
that does not exist.
In any case, the EU is a regional organization with legal personality (Art. 47 TFEU),
and it will be the EU that joins the IMF. The Euro area has no international legal person-
ality as an international organization and thus could not be an IMF member69 even it
was possible to organize two EU constituencies in the IMF, one for the Euro area coun-
tries and the other for the EU countries outside it with less intervention by EU institu-
tions. It is clear, however, that a strong coordination between these two EU constituen-
cies could be desirable and easy to establish.
The model to follow in the IMF for EU membership should be the joint participation
of the EU Member States and the EU (mixity). The substitution of a single EU represen-
tation and a single EU chair for EU countries is neither legally founded, nor politically
workable, because the EU could not substitute for the EU countries outside the Euro ar-
ea, which continue to have their own currencies and national economic and monetary
policies. On the other hand, the IMF has competences related to the surveillance of
economic and fiscal policies, and even the Euro area Member States continue to keep
competences in this field.
In my opinion, the IMF’s Articles of Agreement do not fulfil the CJEU conditions, and
the functional succession doctrine applied to the GATT is excluded in this case, because
the matters covered by IMF activity are partially shared competences in EU law. Moreo-
ver, the other IMF members did not accept the EU institutions in substitution for EU
countries in the Fund.70 Consequently, an EU membership in the IMF could be a mixed
69 See the reasoning in that sense of J. WOUTERS, S. VAN KERCHOVEN, T. RAMOPOULOS, The EU and the Euro
Area in International Economic Governance, cit., pp. 317-319.
70 This functional succession doctrine has been constructed by the CJEU in, among others, judgment
of 12 December 1972, joined cases 21/72 e 24/72, International Fruit Company NV et al. v. Produktschap
voor Groenten en Fruit; judgment of 3 June 2008, case C-308/06, Intertanko et al. v. Secretary of State for
Transport, para. 48; judgment of 21 December 2011, case C‑366/10, Air Transport Association of America
and Others, paras 61-63. The CJEU recognized that multilateral agreements to which the EU is not a party
may be binding upon the EU, provided that five conditions are satisfied: (i) All EU member states are par-
ties to the multilateral agreement; (ii) member states intend to continue to be bound by such multilateral
agreement as evidenced by their statements or in provisions of the TFEU; (iii) the multilateral agreement
has been entered into prior to 1 January 1958 or before the accession of the country to the EU; (iv) the

492 Manuel Lopez-Escudero
representation and will not affect the IMF membership of the EU countries. This conclu-
sion71 is in line with the EU membership in other international organizations such as the
WTO, the Food and Agriculture Organisation, or the European Bank for Reconstruction
and Development.72
iv.2. Improvement of the coordination of the EU Member States on IMF
issues
The current EU coordination mechanism on IMF issues is based as I explained before on
the work of two committees, the Brussels-based SCIMF and the Washington-based
EURIMF. The performance of this mechanism is limited at the moment. In particular, the
SCIMF has demonstrated little ability to steer the EURIMF due to a number of deficien-
cies. First, the SCIMF is hindered by its composition, which includes too many officials,
some of whom are too junior to speak with authority on sensitive policy issues. Second,
the SCIMF meets on a monthly basis, whereas the EURIMF meets as many as three
times per week when there are urgent matters to discuss. Third, the SCIMF devotes
most of its attention to horizontal policy issues such as the development of common
matter of the multilateral agreement has later been fully and exclusively assumed by the EU; and (v) the
other contracting parties to the multilateral agreement have recognized such a shift in competence from
the member states to the EU. The only international agreement that the CJEU considers as fulfilling these
conditions was the GATT. However, the Court recently considered these conditions were missing in the
Chicago Convention on Civil Aviation and the MARPOL Convention on marine pollution. On this cases, see
P.J. KUIJPER, It Shall Contribute to the Strict Observance and Development of International Law, in ECJ, The Court
of Justice and the Construction of Europe: Analyses and Perspectives on Sixty Years of Case-law, Berlin: Spring-
er Verlag, 2013, pp. 593-594; A. ROSAS, The Status in EU Law of International Agreements Concluded by the
Member States, in Fordham International Law, 2011, pp. 1304–1345; R. WESSEL, Reconsidering the Relationship
between International and EU law: Towards a Content-based Approach, in E. CANNIZZARO, P. PALCHETTI, R.
WESSEL (eds), International Law as Law of the European Union, The Hague: Martinus Nijhoff, 2011, pp. 7–33.
71 Louis rejects this interpretation because he said that “the economic perspective in the Fund is lim-
ited by the main objective of monetary and financial stability that, in turn, has to contribute to growth and
jobs. On the other hand, the joint participation of the EU and its Member States raises problems due to
IMF is a very specific financial institution based on quotas that are intended to express, by the use of ob-
jective data, the relative ranking of any country in the world economy. Nothing similar is to be found in
other international institutions” (J.V. LOUIS, The International Projection, cit., p. 80).
72 See among others F. HOFFMEISTER, Outsider or Frontrunner? Recent Developments under International
and European Law on the Status of the European Union in International Organizations and Treaty Bodies, in
Common Market Law Review, 2007, pp. 41-68; R. WESSEL, The Legal Framework for the Participation of the Eu-
ropean Union in International Institutions, in Journal of European Integration, 2011, pp. 621–635; J. WOUTERS, J.
ODERMATT, T. RAMOPOULOS, The EU in the World of International Organizations: Diplomatic Aspirations, Legal
Hurdles and Political Realities, in M. SMITH, S. KEUKELEIRE, S. VANHOONACKER (eds), The Diplomatic System of the
European Union: Evolution, Change and Challenges, London: Routledge, 2015; R. WESSELS, S. BLOCKMANS, The
Legal Status and Influence of Decisions of International Organizations and other Bodies in the European Union,
in P. EECKHOUT, M. LOPEZ-ESCUDERO (eds), The European Union’s External Action in Times of Crisis, Oxford: Hart
Publishing, 2016 (forthcoming).

New Perspectives on EU-IMF Relations: A Step to Strengthen the EMU External Governance 493
views on exchange rate policy and the international economic situation, whereas the
EURIMF spends most of its time trying to reach a common view on country-specific is-
sues in the context of IMF Art. IV consultations.
The Commission Proposal envisages strengthening this EU coordination on IMF is-
sues until the establishment of a Euro area single chair. Arts 6 to 9 references some
transitional arrangements in order for the Euro area to present a more coherent posi-
tion within the IMF, in particular in the Executive Board, and the IMFC.
First, Art. 9 recalls the Council’s ability, according to Art. 138, para. 1, TFEU to adopt
a common position on IMF issues and imposes (“shall”) on the Euro area Member States
the obligation, within the Council, the Eurogroup, the EFC and/or the EWG, as appropri-
ate, to closely coordinate and agree on common positions on all matters of Euro area
relevance for the IMF Executive Board and Board of Governors meetings and shall use
common statements on those issues.
This obligation can only be put in practice by improving the functioning of the two
committees in charge of this coordination, the Brussels-based SCIMF and the Washing-
ton-based EURIMF. Perhaps it will be possible to create a Euro area SCIMF, linked to the
EWG, and maintain the current SCIMF dependence on the European Financial Commit-
tee, similarly to the way the relations between the Eurogroup and the Ecofin Council are
organized. The SCIMF function might be reformed using as a model the EU Trade Com-
mittee (previously known as the Art. 133 committee), which closely monitors the Com-
mission’s involvement in international trade talks through weekly meetings at the level
of deputies and monthly meetings at the level of full members. In addition, the reverse
majority procedure now accepted within the new EU economic governance framework
could be applied in the decision-making process of the SCIMF.
It is interesting to note that Art. 218, para. 9, could be useful to strength the EU co-
ordination in the IMF as clarified by the CJEU in a recent case which relates to decisions
taken by the International Organization for Wine and Vine (IOV), of which the EU is not a
member, but several of its Member States are. On 19 June 2012, the Council by quali-
fied majority with Germany voting against adopted a decision establishing an EU posi-
tion to be adopted in the OIV73 on the basis of Arts 43 and 218, para. 9, TFEU. Germany
(itself a member of the OIV) brought an action for annulment against that decision chal-
lenging Art. 218, para. 9, TFEU as the correct legal basis for the adoption of the decision
arguing that Art. 218, para. 9, TFEU concerns only the adoption of the positions of the
Union in bodies set up by international agreements of which the Union is a member. In
its judgment of 7 October 2014 the Court reached a different conclusion. It argues that
there is nothing in the wording of Art. 218, para. 9, TFEU to prevent the European Union
73 Council Document 11436 on establishing the position to be adopted on behalf of the European
Union with regard to certain resolutions to be voted in the framework of the International Organisation
for Vine and Wine (OIV).

494 Manuel Lopez-Escudero
from adopting a decision establishing a position to be adopted on its behalf in a body
set up by an international agreement to which it is not a party. 74
However, there are complex limits to the ability of the EU members to forge com-
mon positions; some EU countries have difficulties or have no possibility of respecting
the agreed position when they are in mixed constituencies where the majority is against
the EU common position.
The second transitional arrangement is the extension to the Euro area as a whole of
the ECB observer status in the IMF Executive Board. Art. 6, para. 1, of the Proposition
entrusts the Eurogroup, the Commission, and the ECB to negotiate jointly to secure with
the IMF the status of observer for the Euro area within the IMF Executive Board. This
negotiation must be conducted taking into account conditions as set out in para. 2:
- the Euro area shall be represented in the Executive Board by the representative of
a Euro area Member State already a member of the Board. That is the formalization of
the current practice of having one of the current Executive Directors of the Euro area
Member States, the EURIMF President, also representing the interests of the Euro area.
- The representative shall be designated for two and a half years in accordance with
the procedure provided for in Art. 2 of Protocol no. 14 on the Eurogroup annexed to the
Treaties.
- The Commission and the ECB shall also be able to attend meetings and intervene,
as appropriate.
- An observer office shall be established within the IMF in order to support the ex-
ercise of the euro area's observer rights (Art. 6, para. 3).
- The status of observer in the Executive Board for the Euro area as a whole would
allow covering the full range of Euro area matters, which include today most of the IMF
activities.
The third transitional arrangement is related to the Euro area status in the IMFC.
Art. 7 of the Proposal put by the Eurogroup, the Commission, and the ECB in charge to
secure with the IMF a right for the Euro area to address the IMFC. The EU wants to
maintain the current situation in which the Commission and ECB are already observers
in the IMFC and to entrust to the President of the Eurogroup the Euro area representa-
tion in its Spring and Annual Meetings and the right to make a statement for the Euro
area instead of the EU Council rotating presidency.
The last transitional arrangement concerns the reshuffling of the EU constituencies
in order to create a Euro area single chair at the IMF Executive Board.
74 Court of Justice, judgment of 7 October 2014, case C-399/12, Germany v. Council. “Where an area of
law falls within a competence of the European Union, such as the one mentioned in the preceding para-
graph, the fact that the European Union did not take part in the international agreement in question does
not prevent it from exercising that competence by establishing, through its institutions, a position to be
adopted on its behalf in the body set up by that agreement, in particular through the Member States
which are party to that agreement acting jointly in its interest” (para. 52).

New Perspectives on EU-IMF Relations: A Step to Strengthen the EMU External Governance 495
iv.3. Euro area unified representation
The Commission Proposal envisages a unified representation of the Euro area within
the IMF by 2025 at the latest and paves the way to the reshuffle of the current IMF con-
stituencies into a single or some chairs composed only by Euro area countries. This re-
shuffle is the most controversial question to resolve in order to reach this unification.
In fact, the Commission thinks about a gradual rearrangement of the IMF constitu-
encies in the transitional period and a single chair at the end of the process. Art. 8 of
the Proposition forced the Euro area countries to regroup to establish one or several
constituencies composed only of Euro area Member States and lays down the obliga-
tion to fully coordinate and agree in advance within the Council, the Eurogroup, the EFC
and/or the EWG, as appropriate, all questions related to constituency arrangements of
the IMF involving Euro area countries. In addition, the positions taken in relation to
these constituency arrangements or changes thereto shall be consistent with the objec-
tives of increasing coherence of the representation of the Euro area and achieving its
unified representation within the IMF.
The entry into force of the 2010 IMF reform after US approval will facilitate the re-
shuffling of the EU constituencies on the IMF Executive Board. With the move to an all-
elected Executive Board, it would become legally possible for executive directors who
were formerly appointed by single-seat countries such as France and Germany (the
United Kingdom is outside the Euro area) to be elected by other Member States and to
represent them in the future. Also, the limit of 9 per cent of the quotas on countries
merging into a constituency will go out, and it will be possible for big Euro area coun-
tries to come together and with other medium-size and small Euro area countries.
As I pointed out before, a first reshuffling was decided for some EU countries in No-
vember 2012. A new Benelux constituency and a Central and Eastern European constit-
uency have been created, in order to accomplish the commitment to reduce ‘‘advanced
European country representation’’ at the IMF Executive Board by two Executive Direc-
tors, a move included in the 2010 IMF reform. This reshuffling affects Euro area coun-
tries alongside a number of (potential) EU candidate countries, close European neigh-
bours and even Asian countries. The constitution of these two new constituencies is not
in line with the Commission Proposal and this reshuffling could be understood as a way
for medium and small countries of the Euro area to perpetuate their power in the IMF.
It is possible to speculate about potential new constituencies, taking into account
the rationale to create constituencies in the IMF.75 The Commission Proposal envisages
75 For Woods and Lombardi an effective constituency has four features: Maximization of voting pow-
ers, a shared agenda, unity within the constituency beyond shared interests, and lobbying capacity and
technical support. Applying these features to the creation of constituencies by EU countries, the panora-
ma is discouraging. In spite of the fact that EU countries share a similar agenda, have shared interests in
IMF matters, and have lobbying capacity and technical means to build new IMF constituencies, they will

496 Manuel Lopez-Escudero
in the transitional period to establish one or several constituencies composed of only
Euro area Member States. In my opinion, it is a bad strategy and the reshuffling will be
more difficult. I think that it will be easier and more desirable in this transitional period
to include all the EU countries and even to attract European candidates for future ac-
cession to the EU (Balkan states, Iceland) and other European countries like Norway,
Switzerland, Ukraine, Moldova, Belarus or Turkey.
Using this broader approach, we can spread the reshuffling in several steps. The
easiest reshuffle would be for Spain to leave its current Central American constituency
and join the Italian constituency with an agreement between these two states to rotate
the posts of executive director and alternate. Poland could migrate to the Central and
Eastern European constituency and Ireland could leave the Canadian constituency and
join either the Nordic/Baltic or the Benelux constituencies. It is also possible to envision
a Mediterranean chair that could encompass France, Italy, Spain, Portugal, Greece, Mal-
ta, and Cyprus; a British/Nordic/Baltic chair which would add the United Kingdom and
Ireland to the current Nordic/Baltic constituency; a German-Benelux constituency that
would encompass Germany, the Benelux countries, and Austria; and a Central and
Eastern European constituency comprised of Poland, Hungary, Czech Republic, Slovakia,
Slovenia, Romania, Croatia, and Bulgaria.
The end of the process should be a unified representation with a single seat for the
Euro area within all organs of the IMF. Art. 3 would specify the meaning of this unified
representation which shall be based on the following principles:
- in the Board of Governors, presentation of the views of the Euro area by the Pres-
ident of the Eurogroup;
- in the IMFC, representation of the Euro area by the President of the Eurogroup;
- in the IMF Executive Board, direct representation of the Euro area by the Executive
Director of a Euro area constituency, following the establishment of one or several con-
stituencies composed only of Euro area Member States;
- election of the Executive Director, as referred to above, upon proposal of the Pres-
ident of the Eurogroup and in accordance with the procedure provided for in Art. 2 of
Protocol no. 14 on the Eurogroup, annexed to the Treaties.
It is unclear if the Commission envisages a single chair or several constituencies for
the Euro area countries. Clearly, a single chair is the highest degree of unification and
the last steps of the unification process, headed by an Executive Director elected upon
proposal of the President of the Eurogroup and in accordance with the procedure pro-
vided for in Art. 2 of Protocol no. 14 on the Eurogroup, annexed to the Treaties. Howev-
er, it could be interesting to open the door to several Euro area chairs if the reordering
not maximize the voting power of each EU country in the IMF (N. WOODS, D. LOMBARDI, Uneven Patterns of
Governance: How Developing Countries Are Represented in the IMF, in Review of International Political Econo-
my, 2006, pp. 480-515).

New Perspectives on EU-IMF Relations: A Step to Strengthen the EMU External Governance 497
process of the IMF Executive Board advises it, due to the implications of the other EU
Member States and many third countries. In this case, a strong coordination is needed
and a single Executive Director could speak for the Euro area chairs.
In my opinion, the best end of the reunification process should be to regroup all Eu-
ro area countries in a single constituency, to create another chair with EU countries out-
side the Euro led by United Kingdom (if this country remain in the EU in spite of the
Brexit referendum) and to encourage the creation of another constituency with the
other European countries led by Switzerland. The coordination between the three
chairs should be intense and an agreement could be established to facilitate the flow of
States from one to another (when a European country adheres to the EU, it will join the
EU countries outside the euro constituency and, if a EU Member States accede to the
Euro it will pass to the Euro area chair).
This approach is also interesting to maintain a greater cooperation of the Euro area
with non-Euro area Member States in the IMF. It is important to note that many IMF ac-
tivities are related to matters covered by the EU rules applied to all EU countries as is
the case for internal markets rules on financial services, capital markets union, some
banking union elements and, EMU rules on coordination of economic policies. We can-
not forget that EU Member States outside the Euro are compelled by the obligation to
represents EU interest in an international organisation in which the EU is not a member
(IMF) as the CJEU recalls in the OIV case.
If we have a Euro area single chair, the common position of the Euro area countries
in IMF activities is necessary.76 Nevertheless, Art. 4 of the Proposal establishes that all
positions to be taken, orally or through written statements, within IMF organs shall be
fully coordinated in advance within the Council, the Eurogroup, the EFC and/or the Euro
Working Group (EWG), as appropriate. To put this obligation in place and speak with a
single voice this Art. 4 also foresees the creation of a dedicated support structure within
the IMF in order to support all actors engaged in the unified representation of the Euro
area. In my opinion, it will be necessary to rearrange the EURIMF Committee and to cre-
ate an EU Permanent Mission to the IMF following the model applied to the EU repre-
sentation in the WTO.
A remarkable characteristic of the Proposal is the prominent role of the Eurogroup in
the Euro area representation at the IMF. The Eurogroup President is in charge of the
presentation of the views of the Euro area to the Board of Governors, as well as to repre-
sent it in the IMFC meetings. The Eurogroup will also manage the process of rearranging
the current constituencies in order to achieve a single Euro area chair. This pre-eminence
of the Eurogroup is in line with its increasing de facto powers in the EMU internal govern-
ance. However, this is an exception in the EU external relations in which the European
76 The Council always has the power to adopt a common position on IMF activities pursuant to Art.
138, para. 1, TFEU.

498 Manuel Lopez-Escudero
Commission has the dominant position, except the Common Foreign and Security Policy
(CFSP) domains in which the High Representative leads the EU representation.
To counterbalance the Eurogroup pre-eminence it may be adequate for the Euro-
pean Commission to manage the Euro area support structure, the technical infrastruc-
ture required to cook the Euro area common position on IMF activities under the politi-
cal supervision of the Eurogroup.
V. CONCLUSIONS
After many years of inactivity and ad hoc pragmatic arrangements, the time is coming to
rearrange the external side of the EMU. The economic crisis and the subsequent sover-
eign debt crisis in Europe have forced more transfers of competences from the EU
countries to the EU institutions in the economic policy field, and these changes must be
reflected in the EMU’s external relations, including the EU participation in the interna-
tional organisations and fora working in the international financial and monetary sys-
tem, in particular the IMF.
The distribution of power in the global economy is changing, and the EU share in it
is expected to decline in the coming years and decades. The EU Member States’ power
in the international institution must also decline in a similar way. The best measure to
counterbalance this tendency is that EU or at least the Euro area has a joint representa-
tion and speaks with one voice. To this end and to develop Art. 138, para. 2, TFEU, the
European Commission has introduced a Decision Proposal in October 2015 to enhance
the Euro area representation in the IMF in a two-stage process. The final objective is to
have a single Euro area chair in the IMF Executive Board for 2015 leading by and Execu-
tive Director that will be nominated using the Eurogroup Protocol procedure. During
the transitional period, the Eurogroup and the Council will promote and supervise the
reshuffling of the current IMF chairs including Euro area countries to Euro-only constit-
uencies. It is a difficult diplomatic challenge for the EU, because it will also affect EU
Member States outside the Euro and, others close European and even Asian countries.
Hopefully, the US Congress approves in December 2015 the 2010 IMF reform the im-
plementation of which will eliminate legal obstacles to a consolidation of the EU Mem-
ber State constituencies in the IMF.
An encouraging precedent to this reshuffling is that all Euro area Member States
which are currently participating in the Asian Infrastructure Investment Bank have
agreed in January 2016 to form a single Euro area constituency in this Bank.77
77 See the Eurogroup President Jeroen Dijsselbloem information about this decision in
www.consilium.europa.eu.

New Perspectives on EU-IMF Relations: A Step to Strengthen the EMU External Governance 499
The Decision Proposal assigns a prominent role to the Eurogroup to control and
supervise this reshuffling process and to represent Euro area at the IMF. The Eurogroup
President will be in charge of the presentation of the views of the Euro area to the
Board of Governors, as well as to represent it in the IMFC meetings. This pre-eminence
of the Eurogroup is in line with its increasing de facto powers in the EMU internal gov-
ernance but need to be counterbalance with the European Commission powers and the
European Parliament controls.
The Decision Proposal is not ambitious and proposes a single Euro area chair at the
IMF Executive Board but without forcing a legal EU mixed representation in the IMF. In
my opinion, the EU member countries must continue to be IMF members and the EU
must also become an IMF member, after changing the IMF’s Articles of Agreement or
using a broad interpretation of Art. II, Section 2. The EU representation at the IMF Exec-
utive Board could be structured into two constituencies, one including the Euro area
countries and controlled by EU representatives and the other including the remaining
EU countries outside the Euro.
The challenge to articulate a single voice of the Euro area at the IMF is a test for the
external action of the EU in the coming years. In the IMF, the current dispersion of Euro-
pean representation is not only suboptimal from an effectiveness and efficiency perspec-
tive when trying to pursue EU interests, but it is also increasingly at odds with the expec-
tations of the international partners. The EU’s position in the new financial world govern-
ance will dependent on the ability to develop a single voice of the Euro area at the IMF
and subsequently in the remaining international financial organisation and fora.