The ESM was open to our efforts throughout this project, ready to discuss various options for reform, receive our researchers and review our study. Today, the ESM itself published its own evaluation. Its closest peer-institution, the IMF, actually has an independent evaluation office. While she is independent, her evaluation relies on ESM staff.
Our study focused on ESM governance, Prof. Most national parliaments take a relaxed approach to ESM accountability, but creditor countries tend to be much more hands-on. The German Bundestag even has to vote on each and every disbursement by the ESM, even for later tranches in a previously agreed programme, which complicates and politicises negotiations, in particular in view of upcoming German parliamentary elections. Yet budgetary sovereignty lies at the heart of the constitutional setup of parliamentary democracy, making this a particularly hard nut to crack and effectively giving all Member States a veto.
For more on this, see our in-depths study on the ESM here. This echoes a second problem, on document management and access to documents. Such problems are typical for a young institution, and are rendered complicated by the number of stakeholders involved. The ESM has no access to documents procedure, therefore documents can only be obtained if they are held by the Commission, or made available indirectly via the Council of the EU.
The element "GDP" reflects the size of an economy, "reserves" reflect the country's ability to support IMF financing, "current payments" and "current receipts" are considered to account for openness and thus for relevance to IMF operations, and the "variability of receipts" is seen as a measure of vulnerability and thus of a potential need for IMF support.
Overall, the consideration of these elements does not seem to be inappropriate, although their weighting is open to discussion.
If we now take the present CQS as a benchmark for the shift in power as envisioned by the G20, we receive a surprising result. Figure 1 shows the 15 most over-represented and 15 most under-represented countries by plotting the difference between the CQS and the actual quota share based on data which still reflects the current status.
Singapore, for example, currently holds approximately 0. Astonishingly, more than half of the 15 most under-represented countries are EU members 8 out of At the top of Figure 1 , the most over-represented countries are listed. For instance, Saudi Arabia currently holds more than three times the quotas of its calculated value 3. Hence, if the G20 leaders' aim is to give greater voice to developing countries, other indicators of under-representation need to be used.
A starting point may be the new formula recently suggested by the IMF. Interestingly, an overhaul of the quota calculation process was agreed upon, although it has not yet been implemented.
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This was to be achieved via the introduction of a new quota formula that supersedes the current system of five formulas. The aim of this new formula is a simpler and more transparent calculation that better reflects countries' relative economic weights. This latter modification increases the weight of developing countries. Finally, the compression factor was mainly supported by small EU countries in order to offset the high correlation of size-related variables.
The new quota formula represents a compromise. On the one hand, there is a desire for the quota calculation to follow the credo of simplicity. On the other hand, quota calculation has to meet the requirements of multifaceted roles and potentially contradicting functions of quotas. If the new CQS is implemented without any changes, developing and 15 developed countries will lose quota shares while 16 developed and 34 developing countries will gain quota shares and 5 countries' quotas will not change at all. Figure 2 shows the 30 countries that would experience the largest gains and losses in percentage point difference from a change to the newly calculated shares.
China would benefit by far the most from the new quota formula with an increase in quota share of about 3. At the other end of the spectrum, Saudi Arabia would lose approximately 2. Overall, the G20 ambition to increase the quota shares of developing countries would be only partially met by implementing the new IMF quota formula. Thus another instrument for redistributing votes towards developing countries becomes important, namely the increase in the number of basic votes.
The Singapore reform package includes the tripling of basic votes for all members from the current to votes. The role of basic votes has always been debated between supporters of a UN-model one country, one vote and supporters of a bank model votes according to economic power. On the one hand, a greater voice for developing countries would increase acceptance of IMF work and conditions. This could undermine developed countries' control, which is needed for their acceptance of their role as creditors 36 but is sometimes considered as endangering the Fund's credibility in the international financial system.
However, in practice, the role of basic votes has always been rather marginal. Whether this is an ideal level or whether another level would be more appropriate is a political question. Another route toward increasing the impact of under-represented emerging and developing countries would affect the voting system. For example, the Stiglitz Commission 41 advocates more double majorities, which would require not only a certain percentage of votes but also a certain share of members "shares and chairs" From the Stiglitz Commission's viewpoint, double majorities should be used for a broader range of decisions to give greater voice to small members.
A drawback to the double majority principle is that it renders decision-making more difficult by imposing more restrictions.
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Therefore, small members would have greater influence only in the sense of more blocking power. In any case, it seems highly questionable whether even full implementation of the new IMF quota formula will be sufficient to reach the stated objective, i. We do so by referring to three kinds of quotas. Figure 3 shows marked differences between these four allocations of quota shares in the IMF. In some cases, clear trends become obvious: the European Union's share would decline as a result of quota reform, but it would still appear too high compared to its global share of PPP-GDP.
By contrast, the United States is rather under-represented. There are some additional large countries that are obviously under-represented, including China, India, Mexico and Brazil.
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Japan seems to be properly represented. Africa is a more complicated case, as it is over-represented according to economic criteria. The same applies to Saudi Arabia, which received its high quota in the s when the intention was that the IMF should benefit from Saudi Arabia's high revenues from oil sales. In summary, the new IMF quota formula agreed on in Singapore reflects the relative economic weight more properly, although it will hardly go far enough to give emerging and developing countries significant voice and representation. One of the biggest problems of present IMF quota discussion is the case of Europe.
This situation can only be regarded as anachronistic over-representation, criticised even by influential European policymakers, for example by Bini Smaghi. The European over-representation is also reflected in the distribution of seats within the important IMF Executive Board, where 24 executive directors basically agree unanimously on decisions. Therefore, nearly all countries are organised in groups, so-called constituencies, which are represented by an executive director. The exceptions are the five most important countries, including France, Germany and the UK, which are not part of any constituencies but are instead each represented by their own executive director.
In addition to these three European countries, there are another five executive directors from Europe. Seen from the capital and quota shares, the European representation makes sense and one can even claim that Europe is under-represented when benchmarked by the current CQS see Figure 3.
Nevertheless, seen from the viewpoint of representation, as aimed for by the G20, the European control share at the IMF of one third is absurd. If one takes for example the United States as a role model in this respect, the appropriate European representation may be one seat plus, the plus reflecting the diversity of nations and organisations within Europe. We are well aware that quotas have always been and will likely continue to be allocated according to a political process. Nevertheless, the credibility of a policy institution such as the IMF would profit from basing its decisions upon transparent criteria.
Allocating voting shares derived from a certain amount of basic votes plus a quota derived from a reasonable formula would provide a prime example of such an orientation. Seen from this point of view, it is disappointing that G20 leaders did not pledge the implementation of a reformed quota calculation system as the basis for the shift in representation. Nonetheless, history tells us that reaching a consensus on the Fund's quota distribution has always been very difficult.
Colabella et al.
This is the main reason current quotas reflect neither the distribution nor the absolute sum of calculated quotas. Thus, planned quota alignment must also be viewed in relation to historical achievements, which dampen expectations. Against the background of this lowered expectation, one can assess a five per cent shift in quotas as a noteworthy agreement.
However, the bottom line of any reform is its implementation. What has become of the Singapore reform process that was confirmed by the G20?
The outstanding Singapore reform elements can only be implemented by an amendment of the Fund's Articles 49 and thus require a double majority, i. Therefore, the support of G20 members is important in order to advance ratification of the reform package. This is especially true considering that the Singapore reforms were meant to be a two-year reform process, i. What has happened since then? More than a year has passed since the London Summit and the first statement pushing for the Singapore reforms in April Included among these are only twelve G20 countries, meaning seven G20 countries have not yet ratified the resolution.
If one compares these requirements to the current "momentum" in ratification cases, as shown by Figure 4 , it is questionable whether the reforms would be implemented in a timely manner, even with G20 support. The more time that elapses and the more the economy recovers from the crisis, the less urgent the pushing of these reforms will be perceived. Overall, the G20 decisions on governance reforms are modest compared to several earlier proposals, 53 and most of the claims have already been raised for quite some time.
Moreover, the decisions remain somewhat imprecise e. In addition, several points that triggered heavy criticism remain untouched. Voting majority thresholds and the scope of double majorities would be left unchanged. The United States would maintain its veto power even if the new calculated quota shares were implemented one-to-one and basic votes were tripled.
Another concern focuses on quota calculation, which may be streamlined and simplified but which - according to most proposals - would still be completely based on economic factors. By definition, this cannot ensure the representation of poor countries as aimed for by the G Yet, the G20 decisions are a step in the right direction. While they underperform with respect to the expectations and claims that were expressed in some fields, they can be seen as a remarkable first step in comparison to historical achievements.
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However, they only deserve applause if they can be swiftly implemented. Otherwise, it will be difficult to claim any progress at all. The next summit is scheduled for June Robert J. Joseph E.
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