Abstract
The purpose of this article is to investigate the challenges posed by multiregionalism in the context of monetary and financial cooperation. The definition of “multiregionalism” was provided by Björn Hettne to describe a multilayered order of systematic relations among regional organizations and between the latter and international organizations.
Annamaria Viterbo—author of paragraphs 1-4-5.
Francesco Costamagna—author of paragraphs 2-3.
The authors wish to thank Professor Luis Hinojosa and Professor Carlos Esposito for their helpful comments. All errors remain our own.
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Notes
- 1.
Hettne, Globalization and the New Regionalism: The Second Great Transformation, in Hettne/Inotai/Sunkel (eds.), Globalism and the New Regionalism, 1999, p. 1 (1–24).
- 2.
The Eastern Caribbean Currency Union – ECCU, the Central African Economic and Monetary Union – CEMAC, and the West African Economic and Monetary Union – WAEMU.
- 3.
Among the existing RFAs are the Arab Monetary Fund, the Chiang Mai Initiative Multilateralization, and the Latin American Reserve Fund.
- 4.
McKay/Volz/Wölfinger, Regional Financing Arrangements and the Stability of the International Monetary System, DIE Discussion Paper, (2010) 13, p. 1 (1).
- 5.
Council Regulation 332/2002, OJ 2002 L 53/1.
- 6.
Balance-of-payments assistance to non-Euro countries was provided on the basis of Council Regulation 332/2002, OJ 2002 L 53/1.
- 7.
See IMF, 2011 Review of Conditionality: Background Paper 4 – Technical Appendices, 18 June 2012, paras. 7–10.
- 8.
EU Guidelines on EU–Fund coordination, doc. ECFIN/G/C ARES(2009) 365646(REV) (unpublished), for which a summary can be found in IMF, Hungary: Ex Post Evaluation of Exceptional Access Under the 2008 Stand-By Arrangement, 24 May 2011, Appendix I, p. 35. See also IMF, Hungary – Request for Stand-by Arrangement, 4 November 2008, p. 7: “Prior to the recent events in Hungary, no operating procedures had been developed for such interaction between the EU and the IMF. The process as developed in the case of Hungary could, however, become a reference on how to proceed should further cases of a similar nature arise — i.e. EU member states that are not participating in the ERM II mechanism”.
- 9.
Financial assistance to Greece was provided under the so-called Greek Loan Facility.
- 10.
Assistance to Ireland and Portugal was provided in the framework of the European Financial Stabilisation Mechanism (EFSM), established with Council Regulation 407/2010, OJ 2010 L 118/1 and through the European Financial Stability Facility (EFSF), a rescue mechanism established by the Eurozone member States as a Luxembourg company to safeguard financial stability in Europe; see Decision of the 16 Euro Area Member States, 7 June 2010, available at http://www.consilium.europa.eu/uedocs/cmsUpload/Conclusions_EU_16_draft_20100604ter-rev2CLEAN-FINAL.pdf.
- 11.
The Preamble of Council Regulation 407/2010 establishes that the EFSM will be activated in the context of a joint EU/IMF support; moreover, pursuant to Article 3, paragraph 8: “If a financing outside the Union subject to economic policy conditions is envisaged, notably from the IMF, the Member State concerned shall first consult the Commission”, which would examine the possibilities available under the Union financial assistance facility and the compatibility of the envisaged economic policy conditions with the commitments taken by the Member State concerned pursuant to Articles 12, 126, and 136 TFEU.
- 12.
EFSF Framework Agreement, 7 June 2010, available at http://www.efsf.europa.eu/attachments/20111019_efsf_framework_agreement_en.pdf. Its Preamble establishes that financial support to Eurozone member States has to be provided by the EFSF in conjunction with the IMF. Moreover, pursuant to Article 2, Eurozone member States agree that, in the event of a request made for a Financial Assistance Facility Agreement, the applicable Memorandum of Understanding will be negotiated by the Commission, in liaison with the ECB and the IMF.
- 13.
Treaty Establishing the European Stability Mechanism, 2 February 2012, T/ESM 2012/en, available at http://www.esm.europa.eu/pdf/esm_treaty_en.pdf. On ESM Treaty’s compatibility with EU law see ECJ, C-370/12, Thomas Pringle v. Government of Ireland, nyr.
- 14.
Henning, Coordinating Regional and Multilateral Financial Institutions, Peterson Institute for International Economics Working Paper (2011) 9, p. 6.
- 15.
IMF, 2011 Review of Conditionality: Overview Paper, 19 June 2012, para. 38.
- 16.
The size and duration of the ECB’s liquidity support were among the sensitive items that resulted in lengthy discussions.
- 17.
The Memorandum of Understanding (MoU) for the EU and the Memorandum of Economic and Financial Policies (MEFP) for the IMF. “The distinctive character of both documents was nevertheless preserved, with the MoU generally including a wider and more detailed set of structural measures and Fund conditionality focusing on a smaller number of priority actions seen as macro-critical” (IMF, 2011 Review of Conditionality: Background Paper 4 – Technical Appendices, para. 13).
- 18.
Notably, measures related to debt restructuring and the involvement of the private sector.
- 19.
In a currency union, nominal exchange rates are fixed. Moreover, the option of currency devaluation is eliminated for countries actively seeking Eurozone membership (on Latvia, for instance, see below para. 3).
- 20.
According to the Crow Report, surveillance relates to “all aspects of the Fund’s analysis of, scrutiny over, and advice concerning, member countries’ economic situations, policies and prospects” (Crow, External Evaluation of IMF Surveillance, Report by a Group of Independent Experts, EBAP/99/86, 15 July 1999). On IMF surveillance, see, ex multis, Viterbo, International Economic Law and Monetary Measures. Limitations to States’ Sovereignty and Dispute Settlement, 2012, pp. 68–69; Adinolfi, Poteri ed interventi del Fondo Monetario Internazionale, 2012, pp. 115–127; Lombardi/Woods, The Politics of Influence: an Analysis of IMF Surveillance, in Qureshi/Gao (eds.), International Economic Law: Critical Concepts in Law, vol. 2, 2011, p. 164 (164–191); Pauly, The Institutional Legacy of Bretton Woods: IMF Surveillance, 1973–2007, in Andrews (ed.), Orderly Change: International Monetary Relations since Bretton Woods, 2008, p. 189 (189–210); Gianviti, The Reform of the International Monetary Fund (Conditionality and Surveillance), The International Lawyer 34 (2000) 1, p. 107 (107–116).
- 21.
This biannual Report provides detailed analysis for the five main regions of the world (Asia and Pacific, Middle East and Central Asia, Sub-Saharan Africa, Western Hemisphere, and Europe), discussing major economic trends and developments at regional level.
- 22.
IMF Executive Board, Surveillance over Exchange Rate Policies, Decision No. 5392-(77/63), 29 April 1977.
- 23.
However, it must be noted that the obligations regarding domestic policies (Article IV, Section 1(i) and (ii)) are of a soft law nature, requiring member States only to exercise their best efforts to achieve the objectives set out in these provisions.
- 24.
IMF Executive Board, Bilateral Surveillance over Members’ Policies, Decision No. 13919-(07/51), 15 June 2007, as amended by Decision No. 14766-(10/115), 29 November 2010 (so-called 2007 Surveillance Decision).
- 25.
The 2007 Surveillance Decision makes clear that such assessments and advice “will pay due regard to the circumstances of the member” (para. 9) and that, in any case, “the Fund will not require a member that is complying with Article IV, Sections 1(i) and (ii) to change its domestic policies in the interests of external stability” (para. 6).
- 26.
See IMF, 2011 Triennial Surveillance Review – Review of the 2007 Surveillance Decision and the Broader Legal Framework for Surveillance, 26 August 2011; IMF, 2011 Triennial Surveillance Review – Overview Paper, 29 August 2011.
- 27.
IMF Executive Board Decision, Bilateral and Multilateral Surveillance, 18 July 2012, available at http://www.imf.org/external/np/sec/pn/2012/pn1289.htm.
- 28.
For an analysis of the IMF legal framework with regard to regional monetary integrations and their classification, see Viterbo, Monetary Regionalism: A Challenge to the IMF, in: Conforti/Ferrari Bravo/Francioni (eds.), Italian Yearbook of International Law, Vol. 16, 2006, p. 139.
- 29.
Informal discussions with EU institutions have been in place since 1992. With regard to other monetary regions, see IMF Policy Development and Review and Legal Departments, Fund Surveillance over Members of Currency Unions, 21 December 2005.
- 30.
IMF Executive Board, Surveillance over Monetary and Exchange-Rate Policies: Members of Euro Area, Decision No. 11846-(98/125), 9 December 1998.
- 31.
IMF Executive Board, Modalities for Surveillance over Euroarea Policies in the Context of Art. IV Consultations with Member States, Decision No. 12899-(02/119), 4 December 2002, as amended by Decision No. 14062-(08/15), 12 February 2008.
- 32.
The IMF staff normally holds talks with representatives of both the Commission and the European Central Bank.
- 33.
IMF Executive Board, Bilateral Surveillance over Members’ Policies, Decision No. 13919-(07/51), 15 June 2007, para. 7.
- 34.
IMF Executive Board Decision, Bilateral and Multilateral Surveillance, 18 July 2012, available at http://www.imf.org/external/np/sec/pn/2012/pn1289.htm, para. 8.
- 35.
Pisani-Ferry/Sapir/Wolff, TSR External Study – An Evaluation of IMF Surveillance of the Euro Area, 19 July 2011 (‘Pisani-Sapir Report’). Said Report was part of a broader exercise for the review of the Fund’s legal framework for surveillance, the so-called Triennial Surveillance Review.
- 36.
See also Palais-Royale Initiative, Reform of the International Monetary System: A Cooperative Approach for the Twenty First Century, 8 February 2011, at 6–8.
- 37.
The Pisani-Sapir Report contends that another factor was IMF excessive confidence on EU capacity to restore stability or what has been termed the ‘Europe is different’ mind set. Furthermore, there were some problems with the way in which surveillance was conducted and, in particular, with the choice of priorities, as many important issues were often left untouched (Pisani-Ferry/Sapir/Wolff, TSR External Study – An Evaluation of IMF Surveillance of the Euro Area, 19 July 2011, paras. 20–22).
- 38.
Pisani-Ferry/Sapir/Wolff, TSR External Study – An Evaluation of IMF Surveillance of the Euro Area, 19 July 2011, paras. 25–28.
- 39.
Horng, The ECB’s Membership in the IMF: Legal Approaches to Constitutional Challenges, European Law Journal 11 (2005) 6, p. 802 (802–822); Bini-Smaghi, A Single EU Seat in the IMF?, Journal of Common Market Studies 42 (2004) 2, p. 229 (229–248).
- 40.
The IMF defines conditionality as covering “both the design of IMF-supported programs – that is, the macroeconomic and structural policies – and the specific tools used to monitor progress toward the goals outlined by the country in cooperation with the IMF” (http://www.imf.org/external/np/exr/facts/conditio.htm).
- 41.
Seitz/Jost, The Role of the IMF in the European Debt Crisis, HAW im Dialog – Weidener Diskussionpapiere (2012) 32, p. 1 (9–10). The authors note that this was mainly due to the fact that “asking for external help was seen as a sign of weaknesses of EU institutions”. See also Henning, Coordinating Regional and Multilateral Financial Institutions, Peterson Institute for International Economics Working Paper (2011) 9, p. 8, according to which EU indecision on this point made the size of package raise from €30 billion to €110 billion.
- 42.
See, ex multis, IMF Legal Department, The Fund’s Mandate – The Legal Framework, 22 February 2010, p. 17.
- 43.
On this reform, see De Witte, The European Treaty Amendment for the Creation of a Financial Stability Mechanism, SIEPS European Policy Analysis 2001/6, June 2011, p. 1 (5–8). For an analysis of Article 136 TFEU, see Viterbo, Articolo 136, in Curti Gialdino (ed.), Codice dell’Unione europea operativo, 2012, p. 1241 (1241–1247).
- 44.
In its Preamble, the Greek Loan Facility Agreement explicitly envisages that the loans are granted in conjunction with the funding granted by the IMF under a stand-by arrangement.
- 45.
Seitz/Jost, The Role of the IMF in the European Debt Crisis, HAW im Dialog – Weidener Diskussionpapiere (2012) 32, p. 1 (18).
- 46.
Henning, Coordinating Regional and Multilateral Financial Institutions, Peterson Institute for International Economics Working Paper (2011) 9, p. 1 (7–8).
- 47.
The entry into force had been originally planned to be on 1 July 2013, but due to worsening conditions, the date has been anticipated. The ESM Treaty entered into force on 27 September 2012, and it was inaugurated on 8 October 2012.
- 48.
I.e., the Greek Loan Facility, the European Financial Stability Mechanism (EFSM), and the European Financial Stability Facility (EFSF).
- 49.
A slightly different approach had been adopted in the ‘Term Sheet on the ESM’, attached to the European Council Conclusions of 20 April 2011, which says that ESM financial support is to be provided “on the basis of strict policy conditionality, under a macro-economic adjustment programme and a rigorous analysis of public debt sustainability” to be conducted by the Commission, in liaison with the European Central Bank, together with the IMF, without further caveats.
- 50.
Proposal for a Regulation of the European Parliament and of the Council on the strengthening of economic and budgetary surveillance of Member States experiencing or threatened with serious difficulties with respect to their financial stability in the euro area, 23.11.2011, COM(2011) 819 final.
- 51.
Amendments adopted by the European Parliament on the proposal for a regulation of the European Parliament and of the Council on the strengthening of economic and budgetary surveillance of Member States experiencing or threatened with serious difficulties with respect to their financial stability in the euro area, 13 June 2012, A7-0172/2012.
- 52.
The ESM Treaty (Article 13.3) uses a similar wording, by stating that the IMF is to be involved “wherever possible”.
- 53.
Article 7 Regulation 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 experiencing or threatened with serious difficulties with respect to their financial stability, OJ L140 of 27.05.2013.
- 54.
Lütz/Kranke, The European Rescue of the Washington Consensus? EU and IMF Lending to Central and Eastern European Countries, LEQS Paper 22/2010, May 2010, p. 1 (8). On the problems affecting the Latvian economy and that of other fellow Eastern European ones, see Åslund, The East European Financial Crisis, CASE Network Studies and Analysis No. 395/2009, p. 1 (9–16).
- 55.
Latvia was included in the ERM II in April 2005 at a central rate of 0.702904 per 1 Euro; Latvian authorities unilaterally committed to keep the Lats within the range of plus or minus one per cent relative to this rate, although the ERM II allows currencies to float within a range of plus or minus fifteen per cent. On the ERM II and ensuing obligations for participating countries, see Viterbo, Verso l’allargamento dell’Unione economica e monetaria: l’Exchange Rate Mechanism II, Il Diritto dell’Unione europea (2005) 4, p. 761 (761–795).
- 56.
That, in any case, had to be eventually postponed to 2014 due to a worsened economic situation.
- 57.
Lütz/Kranke, The European Rescue of the Washington Consensus? EU and IMF Lending to Central and Eastern European Countries, LEQS Paper 22/2010, May 2010, p. 1 (10).
- 58.
Purfield/Rosemberg, Adjusting under a Currency Peg: Estonia, Latvia and Lithuania during the Global Financial Crisis 2008–09, IMF Working Paper, September 2010, pp. 12–13. The term covers 4 main elements: a sizeable fiscal adjustment, adjustment of nominal wages, preserving of financial stability, and repairing of private corporate and household balance sheets.
- 59.
Seitz/Jost, The Role of the IMF in the European Debt Crisis, HAW im Dialog – Weidener Diskussionpapiere (2012) 32, p. 1 (11–15).
- 60.
Lütz/Kranke, The European Rescue of the Washington Consensus? EU and IMF Lending to Central and Eastern European Countries, LEQS Paper 22/2010, May 2010, p. 1 (2).
- 61.
For a legal analysis of the social cuts imposed on Greece, Ireland, and Portugal, see Triantafyllou, Les plans de sauvetage de la zone Euro et la peau de chagrin, Revue du droit de l’Union européenne (2011) 2, p. 195 (195–208). The author (pp. 201–203) argues that “le lien de causalité entre ‘moyens-objectifs’ se trouve renversé: au lieu d’avoir les finances au service du droit matériel, c’est le droit matériel qui sert les finances”.
- 62.
Frazer/Marlier, Social Impact of the Crisis and Developments in the Light of Fiscal Consolidation Measures, EU Network of Independent Experts on Social Inclusion, February 2011.
- 63.
Theodoropoulou/Watt, Withdrawal Symptoms: an Assessment of the Austerity Packages in Europe, ETUI Working Paper (2011) 02, Brussels. See also Micossi, Misguided Policies Risk Breaking Up the Eurozone and the EU, CEPS Policy Briefs (2011) 260.
- 64.
Viterbo/Costamagna, L’impatto sociale della politica di condizionalità nel contesto della crisi nell’area euro: profili giuridici, in Napoletano/Saccucci (eds), Gestione internazionale delle emergenze globali. Regole e valori, 2013, 167–194.
- 65.
See Lamberte/Morgan, Regional and Global Monetary Cooperation, ADBI Working Paper Series, No. 346, February 2012; IMF, Analytics of Systemic Crises and the Role of Global Financial Safety Nets, 31 May 2011; Henning, Coordinating Regional and Multilateral Financial Institutions, Peterson Institute for International Economics Working Paper (20011) 9, p. 7; Volz/Caliari (eds.), Regional and Global Liquidity Arrangements, 2010; Ocampo (ed.), Regional Financial Cooperation, 2006.
- 66.
See Seminar on regional financial safety nets, 8 October 2010, available at http://www.imf.org/external/np/seminars/eng/2010/spr/. Among the participants at the seminar, there were representatives of the European Financial Stability Facility, the Arab Monetary Fund, the Latin American Reserve Fund, and various East Asian governments involved in the Chiang Mai Initiative Multilateralization process.
- 67.
Document available at www.g20.utoronto.ca/2011/2011-finance-principles-111015-en.pdf.
- 68.
Moreover, it has to be said that not all RFAs have peer surveillance mechanisms. Besides, while there might be a comparative advantage in regional surveillance, there are also concerns over duplication and impartiality of assessments.
- 69.
For a description of existing RFAs, see McKay/Volz/Wölfinger, Regional Financing Arrangements and the Stability of the International Monetary System, DIE Discussion Paper (2010) 13.
- 70.
The AMF was established in 1976 to improve Arab monetary cooperation, promote exchange-rate stability, and correct balance-of-payments disequilibria. Nowadays, it counts 22 member countries.
- 71.
The FLAR was established in 1989 to support member States balance-of-payments difficulties and foreign debt restructuring. Its members are Bolivia, Colombia, Ecuador, Costa Rica, Peru, Uruguay, and Venezuela.
- 72.
The CMI was launched in 2000 as a network of bilateral swap agreements. It was established in the aftermath of the Asian financial crisis, and after the failure of the proposals over the creation of an Asian Monetary Fund, to gain independence from IMF financial assistance. The CMI Multilateralization Agreement was signed in 2009 among the ten ASEAN members, plus China, Japan, and the Republic of Korea, in order to make the “self-managed reserve pooling arrangement governed by a single contractual agreement” (ASEAN+3 Finance Ministers Meeting, Joint Ministerial Statement, May 2007, Kyoto). During the global financial crisis, the CMI was not activated arguably because of the ‘IMF linkage’: in October 2008, Korea in fact preferred entering into a currency swap arrangement with the US Federal Reserve, rather than relying on the IMF or the CMI. See, ex multis, Sussangkarn, The Chiang Mai Initiative Multilateralization: Origin, Development and Outlook, ADBI Working Paper (2010) 230.
- 73.
There are, however, many advocates of a gradual de-linking, to strengthen the region’s ability to deal with a crisis and to provide member countries with an independent alternative to the IMF financing (and conditionality).
- 74.
See Council Decision 2012/211/EU, OJ 2012 L 113/8 and the Memorandum of Understanding setting the economic policy conditionality signed on 14 March 2012. See Clements/Gupta/Nozaki, What Happens to Social Spending in IMF-Supported Programs?, IMF Staff Discussion Note, 31 August 2011, SDN/11/15. Nevertheless, it should be noticed that the Greek programme required significant cuts in social sector expenditures.
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Viterbo, A., Costamagna, F. (2013). Multiregionalism in the Context of the EU Sovereign Debt Crisis: Current Legal Challenges and the Way Forward. In: Herrmann, C., Krajewski, M., Terhechte, J. (eds) European Yearbook of International Economic Law 2014. European Yearbook of International Economic Law, vol 5. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-40913-4_2
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