Another G20 Summit has come and gone with no indication that the 2010 IMF reform package is likely to pass the US Congress any time soon. As we would expect, this summit was filled with expressions of disappointment that the reforms have not passed.
Christine Lagarde issued another statement expressing regret. The G20 included an expression of disappointment in its official communique along with a vague comment about going forward with other options. If you wonder what that means, maybe we have an answer below. Some articles and quotes below and then some comments.
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First the language in the communique:
15. The G20 must be at the forefront in helping to address key global economic challenges. Global economic institutions need to be effective and representative, and to reflect the changing world economy. We welcome the increased representation of emerging economies on the FSB and other actions to maintain its effectiveness.We are committed to maintaining a strong, quota-based and adequately resourced International Monetary Fund (IMF). We reaffirm our commitment in St Petersburg and in this light we are deeply disappointed with the continued delay in progressing the IMF quota and governance reforms agreed in 2010 and the 15th General Review of Quotas, including a new quota formula. The implementation of the 2010 reforms remains our highest priority for the IMF and we urge the United States to ratify them. If this does not happen by year-end, we ask the IMF to build on its existing work and stand ready with options for next steps.
"BRICS countries’ leaders are disappointed by the US block on IMF reforms to help developing countries have more influence internationally. They called for the G20 to ratchet up pressure if America doesn’t ratify the 2010 IMF reform by the end of the year.
“The leaders have called for G20 to plan a discussion of options the IMF will present in January 2015 in case the US doesn’t ratify the 2010 reform by the end of this year," said a joint statement released by the BRICS countries at the G20 summit."
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My added comments:
We have now established that everybody is once again disappointed. We have noted on this blog that many prior "deadlines" have come and gone from those who continue to be disappointed about this issue. But nothing ever really seems to happen when the deadline arrives.
Now, as the new year end 2014 deadline nears, we have a "joint statement" about "options" the IMF will present in January 2015 assuming Congress does not approve the reforms (a pretty safe assumption at this point). But no explanation of what these options might be appears in these post summit statements.
Is there any indication of what those options might be? Perhaps. Take a look at this recent article in Russia Behind the Headlines quoting a Russian official on this issue. Here is what she had to say about some options that might be available:
"The most important thing for us is the still unresolved G20 problem of the IMF reform," Lukash said. She recalled the U.S. Congress has yet to ratify the 2010 resolution. "Not only does it thwart the process of renewing the IMF in accordance with the current reality where we see a big rise in the role of emerging economies. It also prevents the decisions to double the IMF capital from coming into force," she said "We are expecting Russia, as well as our BRICS partners, to propose serious concrete solutions on how to reach alternative solutions, if the U.S. does not ratify this decision before the end of this year," the Russian sherpa said."
"One of the simplest options is "to untie the decision (over the IMF reform of 2010) into various parts. Since the 2010 resolution is a complex packet of agreements, which includes, among other things, amendments to the IMF charter and a decision to double its capital, and each such decision, according to the IMF rule, requires a certain number of votes for them to become effective," the sherpa said."
"These two decisions can be untied, i.e. this packet can be split into several ones, without an approval of the U.S. Congress but at the administration's decision. We will break up the packet and start implementing its parts accordingly, so that all agreements come into force," the Russian Sherpa said about possible solution to the problem of reforming the IMF."
Hmmmmm. The reforms can be split into individual "packets" and approved by the Obama Administration without bothering to get approval from Congress. Let's see, Congress is already upset that the Obama Administration is going to declare a new immigration policy without the approval of Congress. They are threatening to cut off funding for that. This new idea of bypassing Congress to get the IMF reforms approved should go over real well in the new Congress (that believes it was elected to stop the President's agenda). I'm sure they will be happy to just accept another end run around Congress with no blowback of any kind (sarcasm intended). If this really does happen in January 2015, all I can say is, grab your popcorn. This could get interesting.
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