A major structural shift within the IMF is on the cards, following the latest G20 conference.
The IMF is set to undergo a revamp - to the benefit of major developing countries
A meeting of G20 finance ministers in South Korea has agreed on a reform of the International Monetary Fund (IMF) which gives more steering power to large developing nations.
The representation rate among these nations is to be increased by at least six percent, enabling the Washington-based Fund to reflect better the shift in global power.
The decision means that Europe will lose some of its voting power within the IMF, where voting rights are determined by a quota system.
Germany, the organization's largest European shareholder, is set to lose its place as the IMF's third-most influential member to China, which will rise in the ranks from its current number-six position.
"German representation today, before the new reforms, is 6.1 (percent) and later, when all this is carried out, it will be 5.6 percent," said Joerg Asmussen from the German Ministry of Finance.
According to IMF chief Dominique Strauss-Kahn, this will be the largest leadership reform that has ever taken place within the organization since its establishment in 1944.
Still in the top 10
Nevertheless, Europe as a whole will still maintain an important position in the organization.
After the reform, the IMF's top members in descending order of influence will be the US, Japan, China, Germany, Great Britain, France, Italy, Russia, India and Brazil.
Peter Wahl from German development organization World Economy, Ecology & Development (WEED) told German newspaper the Tageszeitung that this shift in power is a "step in the right direction."
However, he criticized the fact that the US was able to defend its ranking much more than Europe, with its position of power going "fully against the trend of world politics."
Europe will also be forced to give up two seats on the IMF's 24-member board.
Traditionally, the head of the IMF is a European and the head of its sister organization – the World Bank – is an American, reflecting a post-war division of financial power in the world which is looking increasingly obsolete amid the rising power of large developing nations like India and China.
Author Eva Wutke (Reuters, AFP)
Editor: Nathan Witkop