Voting Power Implications of a Unified European Representation at the International Monetary Fund

Warwick Economic Working Paper No. 720

40 Pages Posted: 7 Feb 2005

See all articles by Dennis Leech

Dennis Leech

University of Warwick - Department of Economics

Robert Leech

University of London - Birkbeck College

Date Written: January 2005

Abstract

We consider some of the implications of a proposed reform of the voting system of the IMF in which EU countries cease to be separately represented and are replaced by a single combined representative of the European bloc. The voting weight of the EU bloc is reduced accordingly. We analyse two cases: the Eurozone of 12 countries and the European Union of 25. Using voting power analysis we show that the reform could be very beneficial for the governance of the IMF, enhancing the voting power of individual member countries as a consequence of two large countervailing voting blocs. Specifically we analyse a range of EU voting weights and find the following for ordinary decisions requiring a simple majority: (1) All countries other than those of the EU and USA unambiguously gain power (measured absolutely or relatively); (2) The sum of powers of the EU bloc and USA is minimized when they have voting parity; (3) The power of every other non-EU member is maximized when the EU and USA have parity; (4) Each EU member could gain power - despite losing its seat and the reduction in EU voting weight - depending on the EU voting system that is adopted; (5) The USA loses voting power (both absolutely and relatively) over ordinary decisions but retains its unilateral veto over special majority (85%) decisions (as does the EU bloc).

Keywords: IMF, European Union, Voting Power Indices, Penrose Index, Banzhaf Index

JEL Classification: C71, D71, D72, F02

Suggested Citation

Leech, Dennis and Leech, Robert, Voting Power Implications of a Unified European Representation at the International Monetary Fund (January 2005). Warwick Economic Working Paper No. 720, Available at SSRN: https://ssrn.com/abstract=662381 or http://dx.doi.org/10.2139/ssrn.662381

Dennis Leech (Contact Author)

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom

Robert Leech

University of London - Birkbeck College ( email )

Malet Street
London, WC1E 7HX
United Kingdom

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