This paper assesses the dynamics of EU-IMF interaction over the course of European monetary unification. Thereby, it adds to a growing body of literature on the external dimension of EU policy-making. To illustrate how EU-IMF relations have changed over the last 20 years, the paper first finds that member states remain the primary, but not the only actors. Second, it provides a descriptive account of EU-IMF relations in the observed period, both in its institutional and functional dimension. Its main finding is that institutional and functional interaction have not developed in parallel, i.e. that the increase in day-to-day engagement between the IMF and the EU through the activities of surveillance, lending and technical assistance, in particular as a result of the sovereign debt crisis in the euro zone, has not corresponded to formalization of EU-Fund relations.
Table of contents
1.Introduction
2. Who interacts between the EU and the IMF?
3. Channels of EU-IMF interaction
3.1 Institutional interaction
Before EMU (1945 to 1989)
Stage one and two of EMU (1990 to 1998)
Stage three of EMU (1999 to 2006)
Financial and sovereign-debt crisis (2007 to 2013)
Summary
3.2 Functional interaction
Functional interaction: surveillance
Functional interaction: lending
Functional interaction: technical assistance
Summary
4. References
1. Introduction
In recent years, the International Monetary Fund (IMF) has become deeply entrenched in Europe’s political landscape. The last weeks alone have seen the IMF signing off on Ireland’s latest programme review, backing the European Central Bank’s (ECB) interest rate cut and urging the euro area to speed up the establishment of a banking union.[1] Yet, the Fund’s role remains controversial. Justice Commissioner Reding appealed for the IMF’s retreat from Europe because “fundamental decisions, for example on whether to fire tens of thousands of public employees, should not be taken behind closed doors”.[2] The Fund’s influence on the European Union (EU) has grown to a point that parliamentarians in the European Parliament (EP) have called for an inquiry into its involvement in the ‘Troika’, the enhanced cooperation with ECB and European Commission over the euro rescue.[3] However, this has not always been the case. During the crisis in the European Exchange Rate Mechanism (ERM) in 1992/1993, the major European countries “did not view the IMF as a necessary or valued source of financial advice” (Boughton 2012, p.174) – even “aggressively excluding the IMF from any role in their discussions” (Mussa 2008, p.2). By now, the relationship between the EU and the IMF has changed fundamentally, raising important questions about the efficiency and legitimacy of decision-making in the EU.
This paper assesses EU-IMF interaction over the course of European monetary unification. Thereby, it adds to a growing body of literature on the external dimension of EU policy-making which, so far, has mainly focused on the United Nations (UN) and the World Trade Organization (WTO), while the IMF has received only limited attention.[4] As a first step of such a project, this paper addresses the following question: how have EU-IMF relations changed over the last 20 years? First, the paper asks who acts in EU-IMF relations. It finds that member states remain the primary, but not the only actors. Second, it provides a descriptive account of EU-IMF relations in the observed period. In doing so, the paper seeks to operationalize the concept of ‘interaction’ by looking at both its institutional and functional dimension. Anecdotal evidence suggests that institutional and functional interaction have not developed in parallel, i.e. that the increase in day-to-day engagement between the IMF and the EU through the activities of surveillance, lending and technical assistance has not corresponded to formalization of EU-Fund relations. In terms of the timescale, the paper roughly follows the stages of European monetary unification, although earlier developments are also taken into account.
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[1] Wall Street Journal, “Ireland Passes Final Review By Troika”, 7 November 2013; Reuters, “IMF cheers ECB rate cut, sees slack in euro zone” 7 November 2013; Reuters, “EU must speed up banking union to gain trust, IMF says”, 9 October 2013.
[2] Deutsche Welle, “Troika Tensions Heat Up”, 6 November 2013.
[3] EUObserver, “EU Parliament To Probe Bailout Troikas”, 28 October 2013.
Frequently asked questions
What is the main topic of the document?
The document assesses the interaction between the European Union (EU) and the International Monetary Fund (IMF) over the course of European monetary unification. It examines how EU-IMF relations have changed over the last 20 years.
Who are the key actors in EU-IMF relations?
The document identifies member states as the primary actors, but notes that they are not the only participants in EU-IMF relations.
What are the two dimensions of interaction analyzed in the document?
The document analyzes EU-IMF interaction through two dimensions: institutional and functional. Institutional interaction refers to the formal structures and agreements governing the relationship. Functional interaction refers to the day-to-day engagement through surveillance, lending, and technical assistance.
What is the structure of the document?
The document includes an introduction, sections on who interacts between the EU and the IMF, and a detailed analysis of the channels of EU-IMF interaction (institutional and functional). It also contains a table of contents and references.
How has the EU-IMF relationship changed over time?
The document suggests that the relationship has fundamentally changed. In the past the EU "aggressively excluded" the IMF. Now the IMF has grown to a point that parliamentarians in the European Parliament (EP) have called for an inquiry into its involvement in the ‘Troika’.
What are some examples of the IMF's recent involvement in Europe?
The document mentions the IMF signing off on Ireland’s latest programme review, backing the European Central Bank’s (ECB) interest rate cut, and urging the euro area to speed up the establishment of a banking union.
What is the "Troika" mentioned in the document?
The "Troika" refers to the enhanced cooperation between the ECB, the European Commission, and the IMF in rescuing the euro.
What is the Economic and Monetary Union (EMU)?
The document references "Stage one and two of EMU (1990 to 1998)", "Stage three of EMU (1999 to 2006)" to set the timescale of the functional interaction.
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- M.A. Niklas Manhart (Author), 2014, Not Going it Alone: The Dynamics of EU-IMF Interaction over 20 Years of Monetary Unification, Munich, GRIN Verlag, https://www.grin.com/document/271665
