* Europeans reluctant to reduce IMF board seats
* U.S. pushing for powerful new economies to have more say
* Present set-up reflects post-World War Two global order
By Jan Strupczewski
BRUSSELS, Sept 29 (Reuters) - Leading members of the European Union are blocking a U.S. proposal that they give up some seats on the board of the International Monetary Fund to new economic powers, euro zone sources said on Wednesday.
The United States has been pushing for strong emerging economies to have seats on the IMF board, reducing the European representation, and the issue will be discussed at the annual IMF meetings in Washington in early October.
"We have an absolutely stupid position on this, and that is just because people are hanging on to their national chairs and have not yet realised that we are in a currency union besides being a political union," said one euro zone source.
Euro zone and European Union finance ministers will discuss whether and how to reduce the size of Europe's representation on the 24-seat IMF board on Thursday and prepare a joint position for the IMF meetings.
"All the arguments have been exchanged, it is a purely political decision -- do it, or don't do it. At the moment it is all about 'don't do it'," said the source, who is involved in preparing the ministerial meeting.
Germany, France and Britain have their own seats on the board, while EU members Belgium, the Netherlands, Spain, Italy and Denmark represent groups of countries. Switzerland, though not part of the EU, also has a seat.
Europe and the United States have dominated the Washington-based fund since it was set up after World War Two, but that order is now being challenged by the rise of China and other economic powerhouses.
The IMF board is one of the global lender's main decision-making bodies. It approved billions of dollars in emergency loans for countries hit by the global financial crisis and oversees the way the Fund is run.
"I do not expect any big breakthrough at the EU ministers' meeting because people are just sitting tight," the euro zone source said. "They think that by ignoring the problem it will go away."
"There will be no solution in the discussion of the IMF board seats -- there are not many options, no one wants to move," a second euro zone source involved in preparations for the ministers' meeting said.
"We should start a serious debate about the single seat, but many delegations don't want to discuss it," the second source said, adding it was the big, rather than small countries that showed most reluctance to reduce the number of European seats.
The United States, frustrated at Europe's refusal to share more IMF power with emerging economies, took unprecedented action last month to block plans that would have kept Europe's long-running dominance over the board -- action that could lead to the board being cut to 20 seats.
"Then four of the emerging markets: Brazil, India, the Franco-African chair and Argentina would be kicked out of the board," the first euro zone source said.
"The Europeans would say -- well it is the Americans who blocked the decision so you should blame them, but guess who they are blaming? Not the Americans," the source said.
Sources said the only European proposal on the table so far was that the seat now held by Belgium be rotated between Belgium and Turkey. "...that will not be enough, that was on its way anyway," the first euro zone source said.
Sources also said that the Americans and the Europeans have different views on the IMF board seat held by Switzerland -- a European country but not an EU member.
"When the Americans are talking about consolidating the European representation they don't think the Swiss chair should disappear, but when the Europeans talk about it, they think this might be a reasonable possibility," the first source said.
"You have the Europeans hanging on to their number of seats and the position is not to reduce the size of the board or change anything else, whereas all the others say that we should really have only one seat," the first source said.
"So the reasonable compromise between those positions is that in any compromise proposal the Europeans will end up with three or at most four seats and after that we will start negotiating. We will never end up with 7-8 seats," the source said. (Reporting by Jan Strupczewski, editing by Tim Pearce) (jan.strupczewski@reuters.com; +32-2-287 6837; Reuters messaging: jan.strupczewski.reuters.com@reuters.net))