EU OPENS IMF DOOR TO EMERGING GIANTS

Brussels, October 1 (AFP) – Europe opened the door Friday to giving up some power at the International Monetary Fund to emerging economies, in a key gesture ahead of a summit with Asian giants and a crunch IMF meeting.

European Union finance ministers agreed to hold talks with the United States and other IMF partners on EU representation at the international lender, which has been criticised as disproportionate by emerging powers and Washington.

Belgian Finance Minister Didier Reynders, whose country holds the 27-nation EU's rotating presidency, said the bloc was ready to discuss the quota system that determines voting strength and the possibility of giving up board seats.

If the United States agrees to a swing of five percent in these quotas, favouring advanced emerging economies such as China or India, then Europe will consider rotating two of the nine seats it controls on the current 24-berth IMF board.

But a statement and Reynders made clear the concession would only be negotiated if Washington dropped a demand to return the board to its statutory 20 seats by November 1.

Likewise, the United States would also have to relinquish its ability to block majority decisions taken by old and new partners.

German deputy finance minister Joerg Asmussen said Berlin would also "like to abandon the gentleman's agreement that the managing director of the IMF come from Europe and the managing director of the World Bank from the United States."

Ministers agreed to "try to start discussions with the partners in the IMF, first maybe the US but also other partners, to see how it is possible to organise a quota revision," Reynders said ahead of the IMF's annual meeting on October 8-10.

"In 2010 we want to organise a shift of five percent in the quotas to emerging and under-represented markets," he said, stressing that the number of board seats would only be looked at "after" the revision of the quotas is implemented.

Reynders said the bloc would introduce "some evolution" on European representation, which emerging economies have long claimed far outweighs the EU's economic strength.

He said the anticipated outcome -- two seats available to share, on similar arrangements to those in the World Bank, where Belgium currently rotates with Austria -- would be "in favour of emerging countries, in favour of under-represented countries."

The bloc said its "shared view was that the functioning of the international institutions should reflect the economic dynamism of emerging markets and under-represented countries."

The extra four IMF seats, allocated by arrangement to Argentina, Brazil, India and Rwanda, would have to be cut back if no diplomatic deal on representation were agreed before its new, two-year board is selected by November 1.

The issue is set to feature heavily during summit talks gathering 46 European and Asian nations including Russia and Australia that begin on Sunday and run through much of next week.

EU leaders expect pressure to give up seats during the eighth Asia-Europe meeting (ASEM) on Monday and Tuesday.

A senior EU diplomat warned this month that a "genuine willingness" to give up votes in the IMF would only materialise if China shows "responsibility" on currency protection.

In April, US Treasury Secretary Timothy Geithner came out publicly with a call for Europe to give up berths, a stance followed in June by the IMF's French managing director, Dominique Strauss-Kahn.

But striking a bargain with the United States will prove very difficult, because Washington, while it only controls 16.7 percent of votes, can block a required majority for action of 85 percent.

The United States has made it clear it does not intend to give up on this privilege.

Reynders added that the IMF was only one international forum where issues of representation "long-term," which he spelled out meant at least 12 years down the line, could be raised.

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