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ABSTRACT
This paper seeks to understand and explain the International Monetary Fund's (IMF) evolving relationship with the European Union (EU) before and after the global financial crisis of 2007–2008. Prior to this crisis, the two sides operated on parallel tracks with little scope for mutual adjustment even during the economic turmoil of the 1970s. After the global financial crisis, the IMF emerged as a de facto institution of the EU thanks to European leaders’ delegation of supervisory powers to both the Fund and the European Commission. The reasons for, and consequences of, this dual delegation are explored here by means of amultiple supervisor variation on the classic principal-agent-supervisor approach.
ACKNOWLEDGEMENTS
Thanks to the editors of this special issue, David Howarth and Lucia Quaglia, and to Ali Burak Güven, Bob Hancké, Christos Kourtelis, Deborah Mabbett, Imelda Maher and Marco Scipioni and two anonymous referees for comments on an earlier version of this article. The usual disclaimer applies.
Notes
1 Protocol 14, Treaty on the Functioning of the European Union.
2 J. Nold, Kohlen- und Baustoffgroßhandlung v Commission of the European Communities, (Case 4–73) [1974] ECR 491.
3 M.S.S. v Belgium and Greece (2001) 53 EHHR 2 offers a nice example of how the European Court of Human Rights can indirectly influence EU policy-making.
4 Article II, Section 2 of the Articles of Agreement of the International Monetary Fund states that membership is open only to countries.
5 Treaty of Rome, Article 197.
6 This Council agreement on medium-term financial assistance replaced the short-term loans provided to Italy in February 1974.
7 IMF Survey (2008) ‘Hungarian central bank building in Budapest: Hungary's program aims to strengthen the financial sector’, IMF Survey Magazine: Countries & Regions, 28 October.
8 The IMF provided €12.5 billion in the form of a Stand-By-Arrangement. The EU provided €6.5 billion using its balance of payment facility. The World Bank also contributed €1 billion to this package. See Gould Citation(2006) for a discussion of the Bank's role as a supplementary financer in IMF programmes.
9 Council Decision (2009/102/EC) providing Community medium-term financial assistance for Hungary (OJ L 37, 6.2.2009).
10 Council Regulation (2010/407/EU) establishing a European financial stabilization mechanism (OJ L 118, 12.5.2010).
11 Council Implementing Decision (2011/77/EU) on granting Union financial assistance to Ireland (OJ L30/34, 7.10.2010).
12 Article 13, European Stability Mechanism Treaty.
13 Article 3, Regulation (EU) No 472/2013 of the European Parliament and of the Council of 21 May 2013 on the strengthening of economic and budgetary surveillance of Member States in the euro area experiencing or threatened with serious difficulties with respect to their financial stability (OJ L 140, 27.5.2013).
14 Council Regulation 2009/431/EC amending Regulation (EC) No 332/2002 establishing a facility providing medium-term financial assistance for Member States' balance of payments (OJ L 128, 27.5.2009).
15 The EFSM was created under Article 122 TFEU, which envisages financial support for member states ‘facing difficulties caused by natural disasters or exceptional occurrences beyond its control’.
16 This fact can be seen most clearly in EU finance ministers’ failure to support recommendations to take disciplinary measures against France and Germany in November 2003.
17 FT Reporters, ‘EU Splits Emerge on Greek Plan’, Financial Times, 10 February.
18 Electoral politics may have played a role here too insofar as involving the Fund meant giving Dominique Strauss Kahn, IMF Managing Director and at that stage the frontrunner to be Socialist candidate for the 2012 French Presidential elections, a prominent role in euro area affairs.
19 Article 121 of the Treaty on the Functioning of the European Union, for example, requires the President of the European Council and the Commission to keep the Parliament informed of the results of EU macroeconomic surveillance.
20 Article 3, Regulation (EU) No. 472/2013.
21 The IMF does not appear to have been quite so enthusiastic about monetary unions in other parts of the world but nor does it appear to have been especially critical. According to Boughton Citation(2001: 78), the Fund adopted a laissez-faire approach in the 1980s to arrangements such as the Communauté Financière Africaine (CFA) franc zone and the East Caribbean dollar area.
22 See Web Table 5.1 of IMF Citation(2012) and table on ‘Distribution of Officials and Temporary Agents by Sex, Nationality, Category and Grade’ at <http://ec.europa.eu/civil_service/about/figures/index_en.htm>.
23 Barroso's call for banking union in June 2012, for example, came just over two weeks before EU leaders agreed on the first step towards this union.
24 In 2007, for example, Nicolas Sarkozy successfully campaigned on a platform of strengthening euro area governance.
25 Council opinion of 10 March 2009 on the updated convergence programme of Latvia, 2008–2011 (OJ C 68, 21.3.2009).
Additional information
Notes on contributors
Dermot Hodson
Dermot Hodson is Senior Lecturer in Political Economy at Birkbeck College, University of London. He is the author of Governing the Euro Area in Good Times and Bad (Oxford University Press, 2011) and co-editor, with Uwe Puetter and Christopher Bickerton, of The New Intergovernmentalism: States and Supranational Actors in the Post-Maastricht Era (Oxford University Press, 2015).