Europe, developing world square off over IMF post
Battle lines were shaping up over the choice of a new leader for the International Monetary Fund (IMF) on Friday as the fund’s board searched for a successor to Dominique Strauss-Kahn.
European nations have moved to keep their lock on the IMF’s top job after Strauss-Kahn said early on Thursday, in a statement from his New York jail cell, that he would be stepping down to battle allegations of sexual assault.
Many of Europe’s leading figures have lined up behind frontrunner Christine Lagarde, the respected French finance minister who, like Strauss-Kahn, has an intimate knowledge of Europe’s debilitating fiscal problems.
But rising powers like Brazil, China and India have moved quickly to prevent a fait accompli with counter-calls for a more transparent selection process.
Egyptian Abdel Shakour Shaalan, who represents the Arab states on the 24-member governing board, was “initiating contacts with his colleagues today about the selection process”, IMF spokesperson William Murray said on Thursday.
The position is a crucial one in the world economy. The global lender of last resort, the IMF each year lends tens of billions of dollars to troubled countries to help right their economies when no others will help them.
But it also lays down strict standards of fiscal and economic reform for its clients, which can upset political and social systems.
The IMF explained that the board would choose a qualified candidate from any of the institution’s 187 member states.
It also said that, while the board is empowered to vote on the managing director, it preferred to reach a consensus on the right person.
But after more than six decades of reaching a consensus on only Europeans, foremost French, some countries and directors were pushing for a change in the process.
“Consensus is a very flexible word ... it is not transparent. One never knows how this consensus is achieved, who is achieving this consensus,” Indian IMF executive director Arvind Virmani told Agence France-Presse.
“There are a lot of people who feel that the process has not been credible ... that certain countries, certain nationalities were virtually pre-selected,” he said, adding that he was expressing his personal views and not India’s official position.
He warned that without a clear-cut nomination and voting process to replace the backroom politicking of the consensus method, some of the most qualified developing economy candidates might not be willing to stand.
Top officials from several emerging powers have made similar appeals.
“The era is over in which it may have been even remotely appropriate to reserve that important post for a European national,” Brazilian Finance Minister Guido Mantega said.
“The make-up of top management should better reflect changes in the global economic structure and better represent emerging markets,” said China’s central bank chief Zhou Xiaochuan.
While developing countries have not coalesced behind one individual, favourites include Turkish former UN official Kemal Dervis, Indian planner Montek Singh Ahluwalia and Mexican central banker Agustin Carstens.
But the eurozone nations were pleading for special consideration this time around given the deep fiscal crises in peripheral states like Greece, Ireland and Portugal—all under expensive IMF bailout programmes.
Strauss-Kahn had played a key role in shaping Europe’s rescue plan, and the countries evidently want a replacement of his stature and knowledge of their predicament.
Europe stands “at the epicentre of a world crisis”, cautioned Luxembourg Premier Jean-Claude Juncker, who heads the 17-nation single currency area. “We have good reasons to name another European.”
“The European Union, whose member states are together the top contributor to the fund, is in a position to propose a high-calibre candidate,” said French President Nicolas Sarkozy.
While several names were in the hat, including the outgoing European Central Bank head Jean-Claude Trichet, 55-year-old Lagarde—who would be the first female IMF chief—picked up public support on Thursday from Italy and Sweden.
The Americans, who hold the largest single chunk of voting rights on the IMF board, with a 16,8% share, refused to take sides publicly.
Treasury Secretary Timothy Geithner said: “We want to see an open process that leads to a prompt succession for the fund’s new managing director.”
One of his top aides, Lael Brainard, added separately: “We haven’t taken a position on any particular candidate.”—AFP