The relationship between the International Monetary Fund (IMF) and the European Union (EU) has been strongly affected by the global financial crisis (2007-2008) and the European debt crisis. While the 2007-2008 crisis reinvigorated the global role and importance of the IMF as a ‘conditional lender’, surveillance institution and technical advisor on financial reform, the outbreak of the European debt crisis – and in particular the problems faced by Greece, Ireland, Portugal and Cyprus – fundamentally changed the EU’s relationship with the IMF and Europe’s status within the IMF. At the same time, the IMF faced strong pressures from European governments to depart from some core principles of traditional IMF approaches to crisis management and the design of programmes. Particularly in the context of the “Troika” (IMF, European Commission and European Central Bank) arrangements towards Greece, differences and divergent approaches between the IMF and the Europeans (European Commission and ECB) emerged, particularly with regards to debt sustainability and restructuring. The lessons learned and repercussions of the recent unconventional and in-depth cooperation between the IMF and the EU (as well as their open disagreements) will need to be carefully followed upon and analysed by national parliaments and the European Parliament to increase transparency in joint EU-IMF activities in the future.
Despite the potentially far-reaching changes in the EU-IMF relationship, the legal contractual basis and the formal representation of EU institutions within the IMF have remained unaltered and limited. The IMF remains a state-centric institution, where EU member states –particularly France, Germany and the United Kingdom– and not the EU wield real influence. Nevertheless, due to close coordination in Washington and in Europe, the EU member states were able to frequently act coherently in the IMF Executive Board and thus to advance coordinated interests within the IMF.
To reflect the changing realities of the world economy and to maintain the IMF’s legitimacy as a central institution in global economic governance, the EU should openly promote the implementation of IMF quota and governance reform (initiated in 2010, but so far blocked by US Congress). Within the EU, an open, pragmatic and outcome-oriented debate should be held about the EU’s role and representation within the IMF as well as the establishment of core processes and rules of transparency on European decision-making and impact within the IMF. While the realization of the often-cited aim of creating “one single EU seat at the IMF” seems highly unlikely in the short term, alternative coordination mechanisms and stronger institutionalization should be envisaged. Most importantly, however, national parliaments, in close cooperation with the European Parliament, could take the lead in demanding regular and systematic processes of transparency – particularly in relation to IMF-EU joint programmes in the Eurozone and wider European Union.
