Europe and the Future of International Monetary Law
37 Pages Posted: 16 Feb 2013 Last revised: 26 Feb 2013
Date Written: 2013
The ongoing financial and economic crisis in the eurozone represents a serious threat to global stability. Among other things, this implicates the monetary union members’ obligations under international monetary law pursuant to the Articles of Agreement of the International Monetary Fund. The Fund is responsible for enforcing those obligations. Yet, it appears that the Fund’s surveillance of the region’s monetary union has had less traction than it could potentially have, especially with respect to the Fund’s concerns about structural aspects of the union. If there are shortcomings in the Fund’s surveillance of the eurozone, this may be due in part to the awkward status of monetary unions within the Fund’s legal framework. The members of the monetary union have delegated to the union many powers that affect their compliance with their obligations under international monetary law. The union itself is not a member of the Fund and, therefore, neither it nor its institutions have any direct formal obligations under the Fund’s Articles. The individual union members have only limited ability to affect union-level policies.
It is possible that extending formal obligations under the Fund’s Articles to the union or to its institutions could improve the Fund’s traction in its surveillance of the eurozone. Doing so might increase the union’s attention to external stability or it might give the Fund more confidence to engage more aggressively with the union. It is also possible, however, that extending formal obligations to monetary unions would not meaningfully improve the Fund’s ability to affect policy making in the eurozone to promote global stability. The Fund’s primary modes of enforcement and engagement are consultation, persuasion, and peer-pressure, and the effectiveness of such modes may not depend on underlying formal obligation. In any event, it is unlikely that such reforms are forthcoming. Rather, the Fund may have more success in increasing its traction with policymakers in the eurozone by improving its practice of surveillance. In this regard, the Fund’s newly articulated mandate for multilateral surveillance and its new framework for integrating it with bilateral surveillance is promising — it appears to be well-suited for engaging with monetary unions, which are fundamentally multilateral entities. In any event, the current threat to global stability arising from the eurozone provides the Fund with an immediate test of its new integrated framework for surveillance and an early opportunity to define the scope and the modes of that framework through practice.
Keywords: IMF, International Montary Fund, Europe, European, Euro, Eurozone, monetary union, monetary law, surveillance
JEL Classification: E4, E42, F02, F33, N10
Suggested Citation: Suggested Citation