The Prime Minister of India Manmohan Singh is saluted by an RCMP officer as he arrives for the G20 summit Saturday, June 26, in Toronto.Jacques Boissinot
Watching the video of Indian Prime Minister Manmohan Singh's arrival in Toronto, I'm reminded of another sleeper issue at this weekend's Group of 20 summit: International Monetary Fund reform.
China, India and others want to overhaul the IMF's governance structure so power isn't so badly skewed in favour of the United States and Europe. The message got through in Pittsburgh, where leaders pledged to fix the situation by November.
But things aren't going well, according to Eswar Prasad, a senior fellow at the Washington-based Brookings Institution, who has deep connections in China and other emerging market economies thanks to his previous life as the head of the IMF's financial studies and China divisions.
What Mr. Prasad has noticed may come as a surprise. One of the main barriers to IMF reform is the smaller European countries that cling to shares that far exceed their current clout in the global economy. Given Europe's debt troubles, you'd expect their ability to resist change at the IMF would be weaker. Instead, Mr. Prasad says European are digging in. That's because the debt crisis has caused divisions in Europe, complicating efforts to get Europe to speak with one voice -- or at least fewer voices -- at the fund.
"What has happened in Europe should have weakened the hand of Europe," Mr. Prasad said in an interview earlier this week. Instead, "it has had a perverse effect," Mr. Prasad said, as the "fractures in the continent have become more exposed...My suspicion is that this is going to get rocky."
Chinese President Hu Jintao has made no secret that IMF reform ranks among his priorities. Mr. Hu's decision to end the yuan's peg to the dollar was widely praised by his peers and a positive step, removing a point of contention ahead of the Toronto talks. That was China's give. What if the older powers don't give back?
"There is a sense that the seat on the table (at the G20) has come without any real power," said Mr. Prasad, citing how the older powers in the Group of Seven are driving the agenda around financial regulatory changes. "That make the IMF important" because it has been given a larger role in global affairs, Mr. Prasad said. "IMF reform is more than symbolically important."