Explanatory Memorandum to COM(2015)603 - Measures in view of progressively establishing unified representation of the euro area in the International Monetary Fund - Main contents
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| dossier | COM(2015)603 - Measures in view of progressively establishing unified representation of the euro area in the International Monetary Fund. |
|---|---|
| source | COM(2015)603  |
| date | 21-10-2015 |
The euro area is a large open economy with international policy responsibilities. The economic and financial weight of the euro area, and the existence of a single monetary and exchange rate policy have made euro area policy decisions and economic developments increasingly relevant for the world economy.
The political relevance of the euro area has been greatly enhanced in recent years. The European Semester, along with adoption of the so-called six-pack and two-pack legislation 1 as well as the Treaty on the Stability, Coordination and Governance in the Economic and Monetary Union 2 have integrated, strengthened and broadened EU-level surveillance of Member State policies in essential areas of macroeconomic and budgetary relevance. The European Stability Mechanism was established as the permanent crisis resolution mechanism for the countries of the euro area. The Union has also put in place a Banking Union with centralized supervision and resolution for banks in the euro area and open to all other Member States.
At the same time, the external representation of the euro area has not kept up with those developments. The progress that has been achieved on further internal integration of the euro area needs to be projected externally, notably through progress towards united external representation in the International Monetary Fund (IMF). The EU (euro area) has exclusive competence or competence shared with its Members States in many areas covered by the Articles of Agreement of the IMF.
The IMF, through its lending instruments and surveillance, is an essential actor in global economic and financial governance. It has played a key role, together with the Commission and the European Central Bank (ECB), in shaping and implementing programmes aimed at rescuing Member States hit by the financial and sovereign debt crises. In addition, the strengthened governance framework for economic policy coordination and strong convergence of financial sector regulation and supervision in the context of the Banking Union mean that, in the future, the IMF will need to go beyond a purely national perspective in its assessment of supervision and crisis management in the euro area.
An effective euro area representation would allow delivering a single euro area message at the IMF on issues such as on programmes and reviews, economic and fiscal policy, macroeconomic surveillance, exchange rate policies, and financial stability. A more coherent representation would also be to the benefit of third countries, in particular through a stronger and more consistent euro area contribution to global economic and financial stability.
In October 2014 the Commission announced in its 2015 work programme 3 that it intends to address the external representation of the euro area in the framework of deepening the Economic and Monetary Union.
In line with the Five President's report of June 2015 on Completing Europe's Economic and Monetary Union 4 , a strengthened international voice is an integral part of the ongoing efforts to improve the economic governance of the euro area. The report particularly emphasizes shortcomings related to the euro area representation in the IMF where, despite important progress made to further coordinate European positions, the euro area does not yet speak with one voice.
The Commission’s Blueprint for a Deep and Genuine Economic and Monetary Union 5 already set out a number of priority actions for strengthening and consolidating the external economic representation of the euro area. It suggested putting the focus on the IMF because of its key role in the framework of international economic governance. External representation was listed among the priority actions suggested for the short term. The European Parliament has also called for a unified external representation of the euro area 6 .
In 2006, the ECOFIN Council agreed that the move to a single euro area chair in the IMF would be a longer-term goal. In this context, Member States considered that several ways could be envisaged in order to move to a possible single euro area chair in the future, including an approach involving temporary steps.
Against this background, this proposal suggests moving to a unified representation for the euro area in the IMF with the President of the Eurogroup as the representative for the euro area. It proposes a gradual approach for achieving this goal involving intermediate transitional steps for representation in the International Monetary and Financial Committee (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 member of the Board, in association with the Commission and the European Central Bank (which has currently observership status in the IMF Executive Board). 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 relevance to the euro area.. Finally, these steps should also aim to strengthen cooperation of the euro area with non-euro area Member States regarding IMF issues. It should be noted that the external representation of the euro area will also depend on the future status of the euro area in the IMF that member countries of the IMF would be willing to grant.
• Legal basis
Article 138 i TFEU foresees the adoption of appropriate measures to ensure unified representation within international financial institutions and conferences. The objective underlying this provision was to achieve a stronger and unified representation of the euro area, given that the effectiveness of the current informal arrangements for representing the euro area was deemed insufficient. As a first step, this provision may be used for the representation of the euro area within the IMF only. Provisions allowing the euro area to better coordinate the establishment of its positions within the IMF should also be included in the proposal as they are necessary and ancillary to the objective of unified representation. Reference is also made to the first paragraph of Article 138 TFEU which enables the Council to establish common positions on matters of particular interests for economic and monetary union within international financial institutions and conferences.
Article 138(3) TFEU provides that, for the adoption of this proposal, only members of the Council representing euro area Member States take part in the vote. The Council acts after consulting the ECB.
At the same time, the Commission decides to withdraw the 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 which was not adopted and became obsolete since the launch of the euro and the entry into force of the Lisbon Treaty. 7